The one-year LPR was set at 3.7 percent in July, unchanged from the previous month, while the five-year LPR remained flat at 4.45 percent, the People's Bank of China (PBC), the country's central bank, announced Wednesday.

The LPR quotations, updated each month, are based on a weighted average of lending rates from 18 designated commercial banks.

The one-year LPR is a reference rate for the majority of new and outstanding lending in the country, while the pricing of home mortgages is based on the five-year rate.

Although some market watchers hold expectations for a downtrend in the lending benchmark, short-term money rates that hover around low levels are seen justifying unchanged rates for the time being.

For instance, the overnight Shanghai Interbank Offered Rate (Shibor), a gauge of the funding costs of the country's interbank market, stood at 1.27 percent on Wednesday, up 2.8 basis points from the day before. The money rate reading has remained at low levels, suggesting reasonably ample liquidity in the market although most other major central banks, including the US Federal Reserve, have continued on a path to raising interest rates.

In May, the PBC held the one-year rate steady at 3.7 percent, while lowering the five-year LPR by 15 basis points to 4.45 percent in May.

The May decision was the second cut in the five-year LPR this year, also the largest and first asymmetrical reduction in the mortgages-referenced longer-term lending rate. The previous changes were in January, when the PBC cut the one-year LPR by 10 bps from 3.8 percent. Meanwhile, the five-year LPR was lowered by 5 bps from 4.65 percent, the first reduction since April 2020. 

Global Times