China left benchmark lending rates unchanged on Thursday for the sixth consecutive month in November, matching market expectations.
Why it’s important
The steady loan prime rate (LPR) fixings underscore the central bank’s reduced urgency to deliver additional monetary easing in the wake of a trade truce between Beijing and Washington, even as October economic data pointed to signs of a slowdown.
By the numbers
The one-year loan prime rate was kept at 3.0%, while the five-year LPR was unchanged at 3.5%.
In a Reuters survey of 23 market participants conducted this week, all participants predicted no change to either of the two rates.
Context
U.S. President Donald Trump had agreed with President Xi Jinping last month to trim tariffs on China in exchange for Beijing cracking down on the illicit fentanyl trade, resuming U.S. soybean purchases and keeping rare earths exports flowing.
The central bank seems to have shifted to a less dovish stance after resurfacing “cross-cyclical” policy adjustments in its third-quarter monetary policy implementation report – its first mention since the first quarter of last year. The policy aims to smooth out the impact of economic cycles.
A string of October economic data, including a contraction in exports and a further slowdown in retail sales, pointed to a tougher fourth quarter, analysts said.
New loans by Chinese banks fell sharply in October from the previous month and missed market expectations, as households and businesses remained wary of taking on more debt due to economic uncertainties and trade tensions between Beijing and Washington.
Key quotes
“The PBOC is willing to tolerate further moderation in loan growth rather than respond with broad-based monetary and credit easing,” said Xinquan Chen, economist at Goldman Sachs.
“That said, with expected economic slowdown now materializing, we argue that monetary policy easing is more likely to be delayed than set aside,” he said, pushing back the forecast for a “dual cut” in both policy rate and banks’ reserve requirement ratio (RRR) to the first quarter of 2026, from the current quarter.