People's Bank of China freezes benchmark rate

JH Kim

Summary

The People's Bank of China said it had frozen the LPR, which is effectively the benchmark rate.
The decision keeps the 1-year LPR at 3% and the 5-year LPR at 3.5%.
With the freeze entering its fourth month, they said changes in the investment environment related to loan rates are limited.

According to foreign reports on the 22nd, the People's Bank of China, China's central bank, froze the loan prime rate (LPR), which is effectively treated as the benchmark rate.

Following this announcement, the 1-year LPR is maintained at 3%, and the 5-year LPR is maintained at 3.5%.

The People's Bank of China cut the 1-year and 5-year LPR by 10bp (1bp=0.01% point) in May this year and has maintained the freeze for four months since June.

LPR is calculated by aggregating the rates of 20 major commercial banks every month. The LPR, effectively called the benchmark rate, is commonly used as the basis for calculating loan interest rates: the 5-year LPR for mortgages and the 1-year LPR for consumer loans such as credit loans.