China holds 'de facto benchmark rate' for 17th straight month — 1-year LPR at 3.0%, 5-year at 3.5%

China has kept its Loan Prime Rate — which serves in effect as the country's benchmark interest rate — unchanged for the 17th consecutive month.

The People's Bank of China announced Tuesday that it would hold the one-year LPR, which guides general lending, at 3.0% and the five-year LPR, which serves as the reference rate for mortgage loans, at 3.5%.

In China, 20 major commercial banks submit their own rates — factoring in funding costs and risk premiums — to an interbank lending center each month, and the central bank then reviews and publishes the compiled LPR. Although a separate official benchmark rate exists, authorities have left it untouched for so long that commercial banks now treat the LPR as the de facto benchmark.

Market experts had widely expected China to hold the LPR steady this month. Reuters reported Monday that all 22 market participants it surveyed anticipated no change.

China set its growth target for this year at 4.5 to 5.0 percent, lower than last year's "around 5 percent" goal.

Growth came in at 5.0 percent in the first quarter but slipped to 4.3 percent in the second quarter amid sluggish domestic demand — the weakest reading since the fourth quarter of 2022. Third-quarter growth, announced Monday, came in at 4.5 percent, slightly above market expectations, bringing the cumulative rate for the first three quarters to 4.6 percent.

At a Politburo meeting chaired by General Secretary Xi Jinping in late July, the Chinese Communist Party set out its economic priorities for the second half of the year: stepping up the intensity and effectiveness of macroeconomic policy, boosting domestic demand through fiscal and financial coordination, and maintaining a more proactive fiscal policy alongside an appropriately accommodative monetary policy stance.

However, market experts say the likelihood of China moving aggressively to cut interest rates remains low.

The Bank of Korea's Beijing office said in a report last month, summarizing recent market assessments, that "the prevailing view is that major economies' interest rate hikes have left China with limited room to cut rates, and that the focus in the second half will be on enhancing the effectiveness of existing policies and adjusting and strengthening structural monetary policy tools, rather than cutting the reserve requirement ratio or policy interest rates."

A diplomatic source in Beijing said the Chinese Communist Party is discussing measures to stimulate domestic demand and that additional demand-side policies are expected to be announced in the second half of the year.