China's central bank held its benchmark lending rates steady for a 16th consecutive month, reaffirming a cautious stance as the window for monetary easing continues to narrow.
The one-year loan prime rate was left unchanged at 3.00%, while the five-year LPR remained at 3.50%, according to the People's Bank of China. All 21 economists surveyed by Reuters had forecast no movement in either rate.
The decision follows the Federal Reserve's interest-rate increase last week and the central bank's indication that further hikes remain possible if inflation persists, widening the policy gap between the world's two largest economies. The yield premium on benchmark 10-year U.S. Treasuries over comparable Chinese government bonds hovered near a record high following the Fed's move.
Domestic constraints also limit the scope for additional cuts. Credit demand remains weak, while pressure on bank profitability and tight net interest margins have reduced the incentive for lenders to absorb lower rates.
PBOC Governor Pan Gongsheng said slower loan growth is becoming typical as the contracting property and local-government sectors shrink credit demand faster than emerging industries can replace it.
Jacqueline Rong, chief China economist at BNP Paribas, noted a transition from deflation toward mild inflation in the economy, reducing the urgency for aggressive stimulus.
"We see the probability of broad-based monetary easing in the fourth quarter declining, particularly given the Fed's hawkish position," said Serena Zhou, senior China strategist at Mizuho Securities. She added that a significant weakening in domestic demand could shift that outlook.
Rong sees China approaching the end of its current rate-cutting cycle, though she cautioned that a weaker-than-expected economic growth trajectory could still raise the odds of another cut later this year.
Both Mizuho Securities and BNP Paribas analysts broadly expect the PBOC to leave rates untouched for the remainder of 2026 unless a pronounced slowdown forces a reversal.
