The People’s Bank of China left its benchmark interest rates unchanged for the fourth straight month despite key indicators suggesting economic slowdown.
The PBoC kept its one-year loan prime rate unchanged at 3.0 percent. Similarly, the five-year LPR, the benchmark for mortgage rates, was retained at 3.50 percent. The decision came in line with expectations.
The bank had reduced its both LPRs by quarter points in October 2024 and 10 basis points each in May.
The PBoC fixes the LPR monthly based on the submission of 18 designated banks. However, Beijing has influence over the fixing. The LPR replaced the traditional benchmark lending rate in August 2019.
Last week, the U.S. Federal Reserve, led by Jerome Powell, reduced its interest rate by a quarter-point, marking the first cut this year as the labor market cools and inflationary pressures build. The Fed has signaled two more reductions this year.
Official data, released last week, showed slowdown in domestic demand, industrial growth and investment. China’s retail sales grew at a slower pace of 3.7 percent in July and industrial output growth eased to 5.7 percent. Meanwhile, fixed asset investment rose only 1.6 percent in the January to July period.
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