China Freezes Interest Rates for 4th Month Despite Trump's 'Tariff Bombardment'

China has frozen its benchmark Loan Prime Rate (LPR) for the fourth consecutive month. This decision comes as various economic stimulus measures implemented since the latter half of last year are gradually showing effects, while there's a need to stabilize bond and currency markets amid Donald Trump's tariff offensive.

The People's Bank of China (PBOC) maintained the one-year LPR at 3.1% and the five-year LPR at 3.6% on the 20th. Market participants had anticipated this rate freeze.

The LPR is calculated by aggregating interest rates from 20 major commercial banks monthly. The five-year LPR typically serves as the benchmark for mortgage loans, while the one-year LPR is used for general loans including credit loans.

Reuters analyzed that "while China needs to stimulate the economy to counter the trade war with the US, it needed to balance between economic stimulus and financial stability due to recent yuan weakness."

However, many market observers expect the PBOC to lower the LPR after the second quarter this year. The Chinese government announced plans for a more accommodative monetary policy at the Central Economic Work Conference held last December. Goldman Sachs assessed that "China will need accommodative monetary policy as it faces persistent deflation concerns."

Regarding this, experts anticipate concrete monetary policy changes around the annual major political events, the Two Sessions (National People's Congress and Chinese People's Political Consultative Conference), scheduled for early next month.

Beijing=Kim Eun-jung Special Correspondent kej@hankyung.com