Loan Prime Rate holds ninth month as PBOC stays cautious

Key Takeaways:

• Ninth straight month of unchanged one-year and five-year LPRs.
• Authorities favor targeted easing via structural facilities and RRR tweaks.
• Measures support credit, shield banks’ NIMs, without lowering economy-wide borrowing costs.

China left benchmark lending rates unchanged for a ninth consecutive month in February, as reported by Reuters, keeping both the one-year and five-year Loan Prime Rates (LPRs) steady. The pause reflects the People’s Bank of China’s calibrated approach.

Rather than broad LPR cuts, authorities appear to favor targeted easing via structural facilities and reserve requirement ratio (RRR) adjustments to support credit while protecting banks’ net interest margins, based on analysis from S&P Global. This channels aid to specific sectors without materially lowering economy-wide borrowing costs.

The one-year LPR stands at 3.00% and the five-year LPR at 3.50%, levels held unchanged in January for an eighth month, according to InvestingLive. February maintained that stance, extending the sequence of steady settings.

For households, an unchanged five-year LPR, the mortgage benchmark, limits immediate relief for new mortgages and refinancing. For corporates, a steady one-year LPR keeps loan pricing stable but does not loosen credit conditions by itself.

Context from sell-side research points to why policymakers are patient. “Recent adjustments to targeted tools have lowered the need for large LPR moves for now,” said Bank of America Securities.

Views differ on timing, but a cautious, data-led bias prevails. “We see modest policy-rate reductions ahead, with LPR cuts more likely to follow later, potentially in Q2,” said Nomura.

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