The People's Bank of China has opted to keep interest rates steady for the third consecutive session as of Monday, while awaiting the policy direction of the incoming US administration. The one-year loan prime rate (LPR) remains unchanged at 3.10 percent, as does the five-year LPR, the benchmark for mortgage rates, which stays at 3.60 percent. This decision was in line with market expectations.
Previously, in October 2024, the bank had reduced both LPRs by 25 basis points each. The People's Bank of China sets the LPR monthly, utilizing input from 18 designated banks, though the government in Beijing holds significant sway over this process. The LPR was introduced in August 2019 as a replacement for the traditional benchmark lending rate.
While the central bank's ability to adjust monetary policy is somewhat constrained due to the weak yuan, it is anticipated that there may be a reduction in policy rates in response to the threat of increased trade tariffs posed by US President-elect Donald Trump.
Last year, Beijing introduced a variety of fiscal and monetary easing measures that enabled the economy to meet its approximate 5 percent growth target for 2024. However, forecasts suggest that economic growth could slow down during the current year.
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