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Investing.com-- The People’s Bank of China held its benchmark loan prime rate steady on Monday, meeting market expectations, signaling Beijing’s preference for boosting economic growth through fiscal measures rather than additional monetary easing.
The PBOC left its one-year LPR at 3.1%, while the five-year LPR, which is used to set mortgage rates, was left at 3.6%. Both rates were at record lows, following a slew of cuts over the past three years.
The loan prime rate (LPR), set by the People’s Bank of China (PBOC) based on input from 18 selected commercial banks, serves as the benchmark for lending rates across the country.
However, the PBOC now has limited room to reduce the LPR further, as previous rate cuts have offered only short-term relief for the economy. Attention has since shifted toward increased fiscal support to boost domestic consumption.
Chinese authorities have recently proposed additional measures to boost consumer spending, including enhanced social welfare programs and subsidies for household goods.
China’s economy grew by 5.4% in the first quarter of the year, surpassing market expectations and offering a strong start to 2025. The better-than-expected GDP figures reflect a rebound in domestic consumption and targeted government support measures aimed at stabilizing key sectors.
Despite the upbeat data, investor sentiment remains cautious due to escalating trade tensions with the U.S. Washington’s recent tariff measures, including expanded restrictions on Chinese tech and manufacturing imports, are seen as a significant threat to China’s export-driven economy.