China keeps benchmark lending rates unchanged for 16th straight month as policy divergence with US widens

The People’s Bank of China held its one-year Loan Prime Rate at 3.00% and its five-year LPR at 3.50% on September 20, marking the 16th consecutive month without a change. The decision was about as surprising as sunrise: all 21 participants in a Reuters poll expected exactly this outcome. What makes the hold noteworthy isn’t the decision itself, but the backdrop. The US Federal Reserve hiked its policy rate by 25 basis points just days earlier, stretching the monetary policy gap between the world’s two largest economies even further. Why the PBOC is sitting tight Both benchmark rates have been frozen since the PBOC trimmed them by 10 basis points back in May 2025. That cut was modest even by central bank standards, and the 16 months of inaction since then tell a clear story: China’s monetary policymakers are out of easy options. PBOC Governor Pan Gongsheng has been unusually direct about the reasoning. He described slower loan growth as the “new normal” for the Chinese economy, a phrase that carries significant weight coming from the country’s top central banker. Slower loan growth has become the “new normal” for the Chinese economy. The subdued demand for loans traces back to two f...