China holds key lending rates as expected

China’s central bank left its benchmark lending rates unchanged today (June 20), in line with expectations.

The People’s Bank of China said in a statement that its one- and three-year loan prime rates (LPRs) would stay at 3% and 5% respectively until its next rate decision. LPRs are normally charged to banks’ best clients and are calculated each month after 20 commercial lenders submit proposed rates to the PBoC.

Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences mortgage pricing.

Today’s decision was in line with the expectations of all 20 market participants polled by Reuters, and came after China’s statistics bureau on June 16 released production data showing that tariff pressures continued to weigh on output last month. China’s industrial production rose 5.8% year on year in May – down from the 6.1% recorded in April, and the slowest increase since November.

Last month, the PBoC reduced both LPRs for the first time since October. It cut the one- and five-year rates by 10 basis points to their current levels at its May policy meeting as trade tensions driven by US tariffs continued to affect China’s economy.