On September 20, the People's Bank of China authorized the National Interbank Funding Center to release the latest Loan Prime Rates for 2026. The 1-year LPR stands at 3.0%, and the over-5-year LPR is set at 3.5%, both unchanged from the previous month. These rates will remain effective until the next LPR announcement.

This marks the 16th consecutive month that LPR has remained on hold. The last adjustment occurred in May 2025, when both the 1-year and over-5-year rates were reduced by 10 basis points. Wang Qing, chief macro analyst at Golden Credit Rating, noted that the September decision to keep both LPR maturities steady aligns with market expectations. He explained that the pricing basis has not changed since the previous announcement, as the central bank's 7-day reverse repurchase rate has stayed at 1.4%. Additionally, reporting banks currently lack the motivation to proactively lower their LPR rate quotes.

The over-5-year LPR serves as a key reference for individual housing loan rates. In May 2024, the People's Bank of China revised its commercial housing loan policies, removing the national minimum interest rate floor for both first and second homes. Provincial branches of the central bank, following a city-specific approach, now guide local market pricing mechanisms to determine whether to set regional rate floors based on local property market conditions. Commercial banks then set individual loan rates by considering these regional floors alongside their own operational and customer risk profiles.

Data shows that in August, the weighted average interest rate for newly issued housing loans was approximately 3.1%, unchanged from the same period last year. For provident fund loans, rates were cut by 0.25 percentage points starting May 8, 2025. First-home provident fund rates now stand at 2.1% for terms of 5 years or less and 2.6% for longer terms. For second homes, the respective rates are no less than 2.525% and 3.075%.

Wang Qing further pointed out that since September, the average overnight interbank lending rate (DR001) has slightly risen. This may reflect the central bank's continuous equal-volume rollover of outright reverse repos and minimal 7-day reverse repo operations. The 1-year certificate of deposit yield for AAA-rated commercial banks has also edged higher, suggesting increased wholesale funding costs for lenders. Meanwhile, the net interest margin for commercial banks in the second quarter improved by 0.01 percentage points to 1.41%, the first rise since the first quarter of 2022, although it remains near historical lows. These factors indicate that banks still have limited room to lower LPR quotes independently.

Looking ahead, Wang Qing suggested that further LPR cuts remain possible. With GDP growth reaching 4.7% in the first half of the year, macroeconomic policy has maintained a steady approach, and monetary policy remains in an observation phase. However, the central bank may implement policy rate cuts in the future, which would likely lead to corresponding LPR reductions. New incremental policies could include expanded and lower-cost structural monetary tools targeting technology financing and inclusive finance, as well as potential interest rate cuts and reserve requirement ratio reductions. These measures would serve to boost consumption and investment while stabilizing the property market.

Regarding global monetary trends, Wang Qing noted that despite tighter external financial conditions, domestic monetary policy should maintain a moderately accommodative stance. This is driven by fundamental differences in price trends between China and major economies. China's CPI rose only 0.9% year-on-year in the January-August period, well below the target level of around 2.0%, with no clear upward trend. In contrast, the United States and the Eurozone are experiencing higher inflation, while Japan faces significant upward price pressures. Additionally, China's established framework for cross-border capital flow management enables the central bank to prioritize domestic economic conditions in its policy decisions. Historical experience since 2020 shows that China has successfully maintained its supportive monetary stance through multiple small policy rate cuts, effectively managing the impact of international monetary policy divergence on the yuan exchange rate.