China keeps loan prime rate unchanged in January with focus on Trump, stimulus

Investing.com– The People’s Bank of China left its benchmark loan prime rate unchanged on Monday, with Beijing likely keeping its powder dry in anticipation of more clarity on U.S. President-elect Donald Trump’s plans for trade tariffs.

The PBOC left its one-year loan prime rate at 3.1%, while the five-year rate, which is used to set mortgage rates, was left at 3.60%. A hold was widely expected by markets, with both rates remaining at record lows after being lowered through 2024.

The LPR is determined by the PBOC based on considerations from 18 designated commercial banks, and is used as a benchmark for lending rates in the country.

The central bank was seen having limited headroom to lower rates, given recent weakness in the yuan. The Chinese currency traded close to its weakest levels since September 2023. 

Still, interest rates are expected to fall further this year, as China ramps up its stimulus measures, especially in the face of increased U.S. trade tariffs.

Particular focus will be on Beijing’s plans for increased fiscal stimulus this year, with the government widely expected to dole out targeted measures to support personal spending and the property market. 

Trump has vowed to impose up to 60% in trade duties on China when he takes office later on Monday, which could bode poorly for the country’s trade-reliant economy.

Still, recent data showed Chinese economic growth picked up in the fourth quarter of 2024, amid support from recent stimulus measures.