China Expected to Keep Key Lending Rates Unchanged for 15th Month

China's benchmark lending rates are set to remain unchanged for a fifteenth consecutive month, according to a market survey, even as fresh economic data points to softening demand across the world's second-largest economy.

The Loan Prime Rate (LPR), the reference rate for most corporate and household loans, is determined monthly after 20 designated commercial banks submit their proposed rates to the People's Bank of China (PBOC).

In a survey of 25 market participants conducted this week, every respondent predicted that the one-year and five-year LPRs would hold steady at 3.00% and 3.50%, respectively, at the upcoming review on Thursday.

The consensus for a steady fixing comes despite a string of July indicators—including industrial output, retail sales, and credit lending—that revealed persistent weakness in domestic demand.

Analysts suggest that policymakers are more inclined to accelerate fiscal spending in the near term to bolster growth, rather than introduce further monetary easing. Citi analysts noted in a research note that the focus should remain on fiscal policies, with little indication of an outright LPR cut this month.

This view aligns with guidance from China's leaders following July's Politburo meeting, where they pledged to support the slowing economy by speeding up disbursement of already-budgeted infrastructure funds for the remainder of the year, avoiding major new stimulus packages.

The central bank last week reiterated its commitment to an appropriately loose monetary stance and said it would roll out practical, effective measures as needed. However, it stopped short of signaling explicit cuts to policy rates or the reserve-requirement ratio.

Meanwhile, commercial banks' net interest margin—a key gauge of sector profitability—rose by a marginal 0.01 percentage point to 1.41% in the second quarter from end-March. This marks the first quarterly increase since 2022, although the margin remains close to a record low.