China keeps LPRs unchanged, signalling patience on broad easing – further detail

China’s steady LPR decision underscores a cautious, targeted easing approach as policymakers weigh domestic weakness against financial stability.

Summary:

• China left LPRs unchanged for an eighth month

• One-year LPR at 3.00%, five-year at 3.50%

• Move aligns fully with market expectations

• Policy focus remains on targeted easing tools

• Broader rate cuts seen later in Q1–Q2

China kept its benchmark lending rates unchanged for an eighth straight month in January, reinforcing signals that policymakers are prioritising targeted support over broad-based monetary easing for now.

The People’s Bank of China left the one-year Loan Prime Rate (LPR) at 3.00% and the five-year LPR, which is closely linked to mortgage pricing, at 3.50%. The decision was fully in line with market expectations, with all respondents in a Reuters survey predicting no change to either rate.

Holding the LPRs steady suggests Beijing is in no rush to deploy sweeping rate cuts, even as growth headwinds persist. Instead, authorities appear focused on sector-specific tools, following last week’s reductions to a range of structural policy rates. While those targeted measures can lower financing costs for selected parts of the economy, they typically deliver a more muted boost to overall growth than benchmark rate cuts.

The central bank has nonetheless signalled it retains room to ease policy further in 2026, including through cuts to banks’ reserve requirement ratios (RRR) and potentially broader interest-rate reductions later in the year. Economists broadly expect any move on benchmark rates to come in the first or second quarter, once policymakers have clearer visibility on domestic demand and external risks.

China’s economy expanded 5.0% last year, meeting the government’s official target. Growth was underpinned by strong exports, as manufacturers captured a record share of global goods demand to offset weak household consumption at home. While that strategy has helped cushion the impact of US tariffs, analysts warn it is becoming harder to sustain without a stronger domestic recovery.

Looking ahead, analysts differ on the policy mix. Bank of America Securities argues that recent sector-specific rate cuts reduce the urgency for near-term, broad-based easing, though it still expects more comprehensive monetary and fiscal support by late Q1 or early Q2. Nomura, meanwhile, sees fiscal policy doing more of the heavy lifting near term and forecasts a modest 10bp rate cut and a 50bp RRR reduction in Q2, alongside possible targeted housing support.

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By holding benchmark rates steady, Beijing is signalling patience, keeping pressure on fiscal policy and targeted credit tools to support growth while leaving scope for broader easing later in 2026.