The People's Bank of China (PBOC) announced its decision to keep the one-year and five-year Loan Prime Rates (LPRs) unchanged for the fourteenth consecutive month. The one-year LPR, a key reference for most corporate and household borrowing, remains at 3.0%. Similarly, the five-year LPR, which significantly influences mortgage rates, was maintained at 3.5%. These rates have been stable since May 2025.
This decision comes as China's economic growth continues to moderate, and the yuan shows signs of strengthening. The stability in LPRs suggests a cautious approach by the PBOC, balancing growth support with financial stability. For retail forex and CFD traders, understanding these domestic monetary policy decisions is crucial as they can influence the yuan's valuation and broader market sentiment, particularly in commodity-related pairs given China's significant role as an importer.
Shifting Policy Focus
While the LPRs formally guide borrowing costs across the economy, their role within the PBOC's monetary policy framework has evolved. The central bank now primarily utilizes the seven-day reverse repo rate as its main instrument for managing liquidity and influencing short-term funding conditions. This shift was highlighted by PBOC Governor Pan Gongsheng in mid-2024, relegating the LPR and the Medium-term Lending Facility (MLF) to more supportive functions.
The reverse repo rate, which the PBOC uses to temporarily inject or withdraw liquidity from commercial banks by buying or selling securities with an agreement to reverse the transaction, offers greater flexibility. Its ability to be adjusted daily provides policymakers with more immediate and precise control over financial conditions compared to the LPR, which is determined monthly based on submissions from a panel of 18 designated banks.
The consistent LPRs reflect the PBOC's current strategy, prioritizing stability while employing more agile tools like the reverse repo rate to navigate economic conditions.
📰 Based on reporting from: ForexLive →