China Keeps Benchmark 1-Year Interest Rate Unchanged in Practice... Cuts 5-Year Rate (2nd Report)

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Despite a significant economic downturn, Chinese financial authorities have kept the Loan Prime Rate (LPR) unchanged. Although the LPR nominally reflects trends in market mortgage loans, the People's Bank of China uses it as a monetary policy tool, effectively treating it as the benchmark interest rate.

[Image source=Yonhap News]

The People's Bank of China, the country's central bank, announced on the 20th that the 1-year LPR was recorded at 3.7%, the same as the previous month. This marks the fourth consecutive month of no change following a 0.1 percentage point cut in January.

However, the 5-year LPR was lowered by 0.15 percentage points from 4.6% to 4.45%. The decision to keep the 1-year LPR steady while cutting the 5-year LPR is interpreted as a monetary policy aimed at the real estate sector. It is understood that lowering the short-term 1-year rate was avoided to prevent an excessive influx of short-term funds into the market.

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