(Yicai) March 20 -- China’s central bank kept both the one-year and over-five-year loan prime rates unchanged this month, maintaining 10 consecutive months of borrowing stability.

The one-year LPR, a key reference for consumer and corporate loans, was held at 3 percent, and the over-five-year LPR, which guides mortgage rates, remained at 3.5 percent, the People's Bank of China said today.

The seven-day reverse repo rate, which is the key benchmark for the LPR, has held steady at 1.4 percent since May 2025, said Dong Ximiao, chief economist at Merchants Union Consumer Finance. This is the main reason for the lack of a policy basis to lower the LPR.

From a macroeconomic perspective, China’s economic data for January and February came in better than expected, which reduces the urgency for a short-term rate cut.

Exports surged at the beginning of the year, significantly beating expectations, while domestic consumption and investment also picked up, and high-tech manufacturing and other new growth areas are expanding rapidly, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

This shows that the macroeconomy got off to a strong start this year, so there is less immediate pressure to stimulate growth, Wang said. On top of that, the central bank rolled out a package of structural monetary policies in January, so current monetary policy is in a ‘wait-and-see’ mode. As a result, both the LPR and policy interest rates are holding steady this quarter.

Commercial banks’ net interest margins remain historically low, which also limits how much they can trim their lending spreads. The average interest rate on newly issued corporate loans in February was approximately 3.1 percent, about 20 basis points lower than the same period last year, according to data from the central bank. While the weighted average mortgage rate was also around 3.1 percent, about 10 basis points lower than a year ago.

On the external front, rising geopolitical tensions in the Middle East have pushed up global oil prices sharply, which may lead to imported inflation, Dong said. At the same time, the Federal Reserve's interest rate cuts are slowing, making it harder for China to lower the LPR due to constraints in the external interest rate environment.

The central bank will probably keep a loose monetary policy for now, said Ming Ming, chief economist at CITIC Securities. But once imported inflation from higher oil prices and other factors kicks in, it will focus on selective interventions using broad easing tools.

The LPR will likely have limited room to fall this year and any cuts will probably be in the range of five to 10 basis points, Dong said.

Editor: Kim Taylor