China's 1-Year LPR Holds Steady at 3.0% for Eight Consecutive Months, Ending 2025 at a Historic Low

By AI Insights

2026-02-04

According to the latest data, China's one-year Loan Prime Rate (LPR 1Y) for December 2025 was reported at 3.0%, unchanged from the previous month. This marks the eighth consecutive month the rate has remained at this level since being lowered from 3.1% to 3.0% in April 2025. Looking back at the full year of 2025, the LPR demonstrated a trend of a "slight decline in the first half and stability in the second half," reflecting that monetary policy has entered an observation period following the easing earlier in the year. The current 3.0% level is at a historic low, indicating that while officials are dedicated to lowering financing costs for the real economy, they have also begun to weigh the resilience of the banking system.

Detailed data shows that the LPR 1Y was at the 3.1% level at the end of the first quarter of 2025, subsequently lowered by 10 basis points (bps) to 3.0% in April, and then remained flat until the end of the year. Meanwhile, the 5-year LPR, which serves as the anchor for mortgage pricing, also mostly remained stable during the same period (based on external market information, it usually moves in tandem with the 1-year rate or undergoes asymmetric adjustments). This eight-month-long "silent period" contrasts with the more frequent adjustments seen in 2024, implying that the policy focus may have shifted from simple "price reductions" to "structural optimization," such as supporting specific industries through re-lending tools.

Market analysis points out that the central bank's decision to stand pat in the second half of the year was mainly constrained by pressure on banks' "Net Interest Margins (NIM)." According to observations from institutions like Capital Economics, excessively compressing loan rates could damage banks' profits and capital replenishment capabilities, thereby affecting the sustainability of credit extension. Furthermore, analysis from Ultima Markets also mentioned that against the backdrop of an unclear U.S. Federal Reserve (Fed) rate cut path and global trade situation (such as tariff concerns), China's central bank tends to reserve policy ammunition to avoid exhausting the room for rate cuts too early.

Looking ahead to 2026, the probability of a significant LPR adjustment in the short term (1-2 months) is low. Forecast data from Investing.com shows that the market generally expects the LPR to continue hovering around 3.0% in early 2026. However, in the medium term (3-6 months), if the recovery of domestic demand falls short of expectations or the real estate market remains sluggish, it cannot be ruled out that the central bank will use a "Reserve Requirement Ratio (RRR) Cut" to release long-term liquidity, thereby guiding the LPR slightly downward. Regarding structural risks, attention must be paid to whether deflationary pressure forces the Real Interest Rate to rise passively, as this would be a key catalyst for triggering the next round of rate cuts.

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