People’s Bank of China Interest Rate Cuts in 2025

The People’s Bank of China (PBOC) plans to cut interest rates further in 2025, aligning its monetary policy more closely with traditional practices in the U.S. and Europe, according to the Financial Times.

The PBOC announced that it will reduce interest rates from the current level of 1.5% “at an appropriate time” in 2025. Additionally, it will simplify its monetary policy by adopting a more singular approach to adjusting interest rates, moving away from the current practice of setting multiple rates for different sectors.

This shift in policy comes as China faces sluggish economic growth. Despite lower interest rates and steady liquidity measures, the economy has not received adequate support.

Slowing growth has intensified the need for monetary policy reform, particularly as credit demand has decreased due to a property market slowdown over the past three years.

Over the past two years, the PBOC has gradually lowered its bank reserve requirement ratio and its loan prime rates, but these actions have provided limited economic support.

This trend is expected to facilitate the PBOC’s shift toward a more streamlined and market-centric approach to interest rates. The central bank indicated last year that its primary policy instrument will be the seven-day reverse repo rate.