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The central bank maintained both the one-year and over-five-year loan prime rates this month, marking the tenth consecutive month of stable borrowing costs. The one-year LPR, which serves as a primary benchmark for consumer and corporate loans, remained steady at 3 percent. Meanwhile, the over-five-year LPR, guiding mortgage rates, stayed at 3.5 percent, according to official sources.
The seven-day reverse repo rate, a key reference for the LPR, has been steady at 1.4 percent since May 2025. This stability largely explains why there has been no impetus to lower the LPR further, said a chief economist specializing in consumer finance.
From a macroeconomic standpoint, recent data for January and February outperformed expectations, reducing the need for immediate rate cuts. Exports at the start of the year jumped significantly, surpassing projections, while domestic spending and investment activities gained momentum. Additionally, high-tech manufacturing and emerging sectors are experiencing rapid growth, noted a prominent macroeconomic analyst.
This strong start indicates the economy is on track, which lessens the urgency for stimulus measures. Moreover, the central bank introduced a series of targeted monetary policies in January, resulting in a cautious approach overall. Consequently, both the LPR and other policy interest rates are holding steady this quarter.
Commercial banks are seeing historically low net interest margins, further limiting their ability to reduce lending spreads. Data indicates that in February, the average interest rate on new corporate loans was roughly 3.1 percent, about 20 basis points lower than the same period last year. Similarly, the average mortgage rate was around 3.1 percent, a decrease of approximately 10 basis points year-over-year.
Externally, rising geopolitical tensions in the Middle East have caused a sharp increase in global oil prices, raising concerns about imported inflation. At the same time, the Federal Reserve’s interest rate policy is slowing, complicating efforts to lower the LPR in China due to external financial conditions.
A policy expert predicts that the central bank will likely maintain accommodative monetary policies for now. However, once inflation imported via higher oil prices and other factors becomes more prominent, the focus will shift to targeted interventions, possibly involving broad easing measures.
Any potential reductions in the LPR are expected to be modest this year, with decreases of only five to ten basis points, said the economist.
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