China expectedly keeps benchmark lending rates steady as Beijing assesses stimulus measures

China’s central bank on Wednesday kept major benchmark lending rates unchanged, as Beijing assesses the effects of its recent stimulus measures. 

The People’s Bank of China said it would keep the 1-year loan prime rate at 3.1%, and the 5-year LPR at 3.6%.

Market watchers polled by Reuters had expected PBOC to keep the lending rates unchanged this month.

There was “no immediate need to adjust the LPR this month,” said Bruce Pang, chief economist and head of research for Greater China at JLL, adding that the Chinese leaders were likely still assessing the impact of recent measures aimed at boosting the economy.

The record-low net interest margins at Chinese commercial banks have limited their ability to support lower lending rates, Pang said, “while another policy rate cut before the end of the year seems unlikely, there remains potential for interest rate cuts in 2025.”

The 1-year LPR affects corporate and most household loans in China, while the 5-year LPR acts as a benchmark for mortgage rates.

The rate decision came after a cut of 25 basis points to both the 1-year and 5-year LPRs last month, and followed China’s October economic data that underscored lackluster momentum in the economy, despite the recent barrage of stimulus announcements.

In October, China reported slower-than-expected industrial production and fixed asset investment growth. The annual decline of real estate investment from January to October also steepened from a year ago.

Only retail sales beat expectations, with a 4.8% year-on-year increase, indicating that recent stimulus had started seeping into certain sectors of the economy.

Since late September, Chinese authorities have ramped up stimulus announcements to spur economic growth, which has been dragged down by a prolonged property crisis as well as weak consumer and business sentiment.

Earlier this month, the Ministry of Finance unveiled a 5-year fiscal package totaling 10 trillion yuan ($1.4 trillion) to tackle local government debt problems, while signaling more economic support could come next year.

China’s central bank also planned to maintain supportive monetary policy, said Governor Pan Gongsheng, who had indicated in October that there was still room to cut several key policy rates by end of the year.

Morgan Stanley expects China’s growth to slow to around 4% in each of the next two years, and has downgraded Chinese equities to “slight underweight” in a note dated Sunday, naming a deflationary environment and rising trade tensions as risks.

“We see a low limited chance that Chinese government will front-load enough fiscal stimulus to target consumption and housing,” the analysts said.

Goldman Sachs also estimated that China’s GDP growth could decelerate to 4.5% in 2025, from 4.9% this year, according to the bank’s note on Monday.

Goldman, however, maintained “overweight” stance on China equities, forecasting a 13% upside to the benchmark CSI 300 index next year.

Donald Trump’s election victory, which is likely to bring higher tariffs on Chinese exports, has added to the uncertainty over China’s export-heavy economy.