China maintains benchmark lending rates at record lows, aligning with forecasts

By Mucahithan Avcioglu

ISTANBUL (AA) - The People’s Bank of China held its benchmark lending rates constant on record lows on Friday, in line with market expectations.

The one-year loan prime rate (LPR) -- a key reference for corporate and household borrowing -- remained unchanged at 3%, while the five-year LPR, a critical benchmark for mortgage rates, was held at 3.5%.

This decision follows a 10 basis point rate cut in April, the central bank’s first rate reduction of the year. Prior to that, the LPRs had been held at these historic lows since a 25 basis point cut in October.

The PBoC’s move comes shortly after the US Federal Reserve opted to keep interest rates unchanged on Wednesday and signaled two rate cuts later this year.

According to China’s state news agency Xinhua, the weighted average interest rate for new business loans fell by 50 basis points to 3.2% in May, while new personal mortgages saw a smaller drop of 55 basis points.

Fresh data from the National Bureau of Statistics (NBS) showed continued signs of recovery in the Chinese economy. In May, retail sales climbed 6.4% year-on-year, industrial output rose 5.8%, and fixed asset investment grew 3.7% over the first five months of the year.

Following the rate announcement, the yuan remained largely stable, trading at approximately 7.19 per US dollar.