China Holds Lending Rates Steady in June After Prior Easing Moves
China left its key lending rates unchanged on Friday, as widely expected, following a broad round of monetary easing implemented last month to bolster the economy.
Why It Matters
Recent progress in easing trade tensions between China and the U.S.—including a trade framework agreement reached in London this month—has lessened the urgency for further stimulus.
Analysts also suggest Beijing may be preserving policy tools amid ongoing uncertainty across various economic and geopolitical fronts in its relationship with the U.S.
Key Figures
- The one-year Loan Prime Rate (LPR) remains at 3.00%
- The five-year LPR stays at 3.50%
A Reuters survey of 20 market analysts earlier this week showed unanimous expectations for no rate changes.
Background
In May, China cut its LPRs for the first time since October and instructed major state banks to lower deposit rates—part of a broader effort to reduce borrowing costs and shield the economy from trade-related headwinds.
Weaker May data—reflecting slowing exports, subdued credit growth, and rising deflationary risks—highlighted the need for ongoing policy support.
In China’s lending landscape, most business and personal loans are linked to the one-year LPR, while the five-year LPR mainly affects mortgage rates.
Expert Insight – DBS
“The policy focus is likely to shift toward injecting liquidity rather than further rate reductions, aiming to protect banks’ net interest margins.
Even a modest 20-basis-point cut to the one-year LPR this year would push margins down to 1.45% by year-end. Therefore, a 50-basis-point cut to the reserve requirement ratio (RRR) appears more probable, potentially releasing around 1 trillion yuan into the financial system.”
