People’s Bank of China Holds Benchmark Loan Prime Rate

The People’s Bank of China (PBOC) left its benchmark loan prime rate unchanged on Monday at 3.1% for one-year loans and 3.60% for five-year loans, used for mortgages. This decision comes as Beijing remains cautious, awaiting clarity on U.S. President-elect Donald Trump’s trade tariff plans.

Both rates are at record lows and were lowered through 2024, reflecting the central bank’s limited ability to reduce rates further due to recent weakness in the yuan, which is trading near lows since September 2023.

Interest rates are anticipated to decline later this year as China increases stimulus measures, particularly due to U.S. trade tariff threats. The government is expected to implement targeted measures to bolster personal spending and support the property market.

Trump has pledged potential trade duties up to 60% on China, raising concerns for the trade-dependent Chinese economy. However, data indicates that Chinese economic growth improved in the fourth quarter of 2024, aided by previous stimulus efforts.