China Keeps 'De Facto Benchmark Rate' LPR Unchanged for Second Month: 1-Year at 3.0%, 5-Year at 3.5%

In Line with Market Expectations

The People's Bank of China has kept the Loan Prime Rate (LPR), which serves as the de facto benchmark interest rate, unchanged.

On July 21, the People's Bank announced that the five-year LPR, which serves as the benchmark for mortgage loans, would remain at 3.5%, while the one-year LPR, which serves as the benchmark for general loans, would be maintained at 3.0%.

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Previously, Bloomberg and other media outlets reported that experts expected Chinese authorities to keep the LPR unchanged again this month.

China's gross domestic product (GDP) for the second quarter grew by 5.2% compared to the same period last year. While this is lower than the first quarter's 5.4% growth rate, it exceeds the 5.1% forecast by economists surveyed by Reuters.

However, some in the market predict that Chinese authorities may introduce additional economic stimulus measures. This outlook is based on weak domestic demand and increased global trade risks stemming from U.S. tariff policies.

Previously, on May 7, the People's Bank of China lowered both the five-year and one-year LPR by 0.1 percentage points for the first time in seven months. This move came as pressure for stimulus measures intensified amid tariff disputes with the Donald Trump administration in the United States.

The LPR is calculated each month by aggregating the interest rates set by 20 banks, taking into account their own funding costs and risk premiums. Although a separate benchmark interest rate exists, it has remained unchanged for a long period, which is why the LPR effectively serves as the benchmark rate.