The headquarters of the People's Bank of China in Beijing Photo: IC

China's one-year loan prime rate (LPR), a market-based benchmark lending rate, came in at 3.1 percent on Thursday, unchanged from the previous month, according to a statement on the official website of the People's Bank of China, the central bank.

The over-five-year LPR, on which many lenders base mortgage rates, also remained unchanged at 3.6 percent. These rates will remain in effect until the next LPR release, the statement said.

The LPRs remaining unchanged for five consecutive months suggests that policymakers have growing confidence in economic growth, an industry analyst said, suggesting it serves as an indication that current interest rate levels can provide adequate support to the market.

The LPRs indicate the financing costs for households and businesses, where lower rates reduce the burden on borrowers and enhance economic support.

The LPRs have been unchanged for five consecutive months, indicating that policymakers have gained greater confidence in economic growth and believe that the current interest rate level provides sufficient support to the market, Hu Qimu, a deputy secretary-general of the digital-real economies integration Forum 50, told the Global Times on Thursday.

Stable interest rates reduce market uncertainty and avoid fluctuations caused by frequent adjustments, Hu said, noting that for banks, businesses and investors, interest rate stability enhances expectations management and reduces the risks associated with financing and investment decisions. 

In 2024, the PBC guided the LPRs downward while implementing two reductions in both the reserve requirement ratios and policy interest rates to help sustain the economic recovery, the Xinhua News Agency reported.

"Overall, the unchanged LPR suggests that China's economy is steadily recovering with policy support, the financial environment remains stable, and there is more room for future policy adjustments," Hu said.

Analysts at Golden Credit Rating, a domestic credit rating agency, said that the March LPR quote remaining unchanged was in line with market expectations. 

Both the policy interest rate and LPR quotes remained unchanged in March, primarily due to the continued effects of last year's package of incremental policies, according to Golden Credit Rating, noting that at the beginning of the year, the nation's macroeconomy maintained relatively strong growth momentum, with faster consumption and investment growth. The impact of trade tensions has not been significant, and the necessity and urgency of interest rate cuts are low, according to the rating agency.

Data from financial information service Wind showed that since LPR reform in August 2019, the one-year LPR has been lowered 12 times, with a total reduction of 121 basis points, while the five-year and longer LPRs have been reduced 10 times, with a total reduction of 125 basis points. Starting in October 2024, the one-year LPR was adjusted to 3.1 percent and the five-year LPR to 3.6 percent, and these remained unchanged for the next five months.

In this year's Government Work Report, the government vowed to "apply an appropriately accommodative monetary policy", which includes "making timely cuts to required reserve ratios and interest rates, and maintaining adequate liquidity." This, according to analysts at Golden Credit Rating, signals that lowering policy rates may remain a key direction this year, with timing being the main focus.

Considering the current real estate market, external trade conditions and overall price trends, a rate cut window could open in the second quarter, likely leading to a corresponding LPR adjustment, per Golden Credit Rating.