China kept its benchmark lending rates unchanged on Sunday (Sept 20), maintaining its monetary policy stance despite the US Federal Reserve’s recent interest rate increase and growing pressure from a widening interest rate gap between the two economies.
The one-year loan prime rate (LPR), a benchmark for corporate and household lending, remained at 3.0%, while the over-five-year LPR, which serves as a reference for mortgage rates, was held at 3.5%.
The rates were announced by the National Interbank Funding Center, as authorised by the People’s Bank of China (PBOC). Both benchmarks have remained unchanged for 16 consecutive months, following their last reduction in May 2025
China’s decision came just days after the US Federal Reserve raised its benchmark interest rate by 25 basis points on Sept 16, bringing the federal funds rate target range to 3.75%–4.0%.
The Fed said the increase was aimed at bringing inflation back towards its 2% target, citing resilient domestic spending, solid economic activity and elevated price pressures
The contrasting monetary policy decisions highlight the different economic conditions confronting the world’s two largest economies.
While the US is tightening monetary policy to contain inflation, China continues to contend with subdued borrowing demand and weakness in its property sector, limiting the effectiveness of further reductions in lending rates.
Economists also noted that Chinese banks face pressure on their interest margins, reducing the room for additional rate cuts without affecting profitability.
