Beijing, China – China’s central bank kept its benchmark lending rates unchanged on Monday, signaling cautious confidence in current economic conditions despite signs of softening momentum. The People’s Bank of China (PBOC) maintained the 1-year loan prime rate (LPR) at 3.0% and the 5-year LPR at 3.5%, aligning with market expectations.
The 1-year LPR influences most corporate and household loans, while the 5-year LPR is widely used for mortgages. This rate pause follows second-quarter GDP growth of 5.2%, slightly below the first quarter's 5.4% but exceeding economists' forecasts of 5.1%. Meanwhile, retail sales in June grew by 4.8%, down from May’s 6.4%, reflecting weaker consumer spending.
Analysts suggest the PBOC is taking a wait-and-see approach. Frederic Neumann, Chief Asia Economist at HSBC, told CNBC that there’s little urgency to lower rates, especially with growth still above target. He added that further rate cuts may yield limited results and that fiscal measures may offer more effective support.
Despite holding steady now, some economists expect additional easing in the second half of 2025. A recent report from Nomura highlighted risks of a “demand cliff,” pointing to U.S. tariffs, property sector weakness, and fiscal strain in local governments as key pressures. Nomura forecasts GDP growth to slow to 4.0% in H2, down from approximately 5.1% in the first half.
While the offshore yuan remained stable around 7.179 per dollar after the rate announcement, analysts believe monetary policy flexibility will be key in countering external and domestic headwinds through the rest of the year.
