The People’s Bank of China (PBoC) kept its key lending rates unchanged for the second consecutive month during the December fixing, in line with market expectations.
China keeps LPR rates unchanged as expected
The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, remained at 3.1%, while the five-year rate, a reference for property mortgages, stayed at 3.6%. Both rates are at record lows following cuts in October and July. This decision comes after Chinese leaders pledged earlier in December to raise the 2025 budget deficit to 4% of GDP, the highest on record, to boost economic recovery and stimulate consumption.
Policy to remain loose next year
They also committed to shifting monetary policy to a "moderately loose" stance next year, departing from the current "prudent" approach to tackle economic challenges. Additionally, a PBoC official recently noted that there is still room to further reduce the reserve requirement ratio (RRR), currently averaging 6.6%.
