The LPR remained unchanged for the 17th consecutive month.
On October 20, the People's Bank of China authorized the National Interbank Funding Center to release the new LPR quotes: the 1-year tenor stood at 3.0%, unchanged from 3.0% last month, while the 5-year-and-above tenor stood at 3.5%, also unchanged from 3.5% last month.
A day earlier, on October 19, PBOC Governor Pan Gongsheng delivered a speech at the opening ceremony of the 2026 Financial Street Forum Annual Meeting, in which the most market-watched remark was that "we will study the appropriate timing to switch the tenor of the central bank's main open market operation instruments to overnight, and the overnight repurchase rate in open market operations will accordingly become the main policy rate."
He also announced the push to reform the loan interest rate pricing benchmark, shifting from pricing that relies relatively narrowly on the Loan Prime Rate (LPR) toward a more diversified pricing benchmark.
Authoritative market experts believe that diversifying the anchor for loan interest rate pricing will help unclog the monetary policy transmission channel.
Since pricing by reference to DR001 carries certain thresholds, it is more suitable for guiding large and medium-sized enterprises with strong financial capabilities, while personal loans (including mortgages) and small and micro enterprise loans will continue to reference the LPR.
LPR quotes remain unchanged
The LPR quotes for both tenors remained unchanged in October, in line with market expectations. One direct reason is that the 7-day reverse repurchase rate, the "anchor" of the LPR, did not change.
Wang Qing, chief macro analyst at Orient Jincheng, believes that the central bank adjusted and improved several monetary policy tools at the end of September, but the main policy rate remained stable, which means the pricing basis for the October LPR quotes did not change.
In addition, commercial banks' net interest margin stands at a historic low of about 1.41%, and quoting banks also lack the incentive to compress their add-ons.
The fundamental reason LPR quotes have remained stable recently is that third-quarter GDP growth rebounded to 4.5%, with new quality productive forces represented by high-tech manufacturing accelerating.
Wang Qing believes that against this backdrop, aggregate monetary policy has maintained its composure, and in stepping up counter-cyclical adjustment, monetary policy has given priority to structural monetary policy tools.
Dong Ximiao, chief economist at Zhaolian, said that third-quarter GDP grew 4.5% year on year, up 0.2 percentage points from the second quarter and exceeding market expectations, which at the macro level reduced the urgency of an immediate rate cut. The possibility of a near-term LPR cut is also low.
On September 29, the central bank adjusted and improved several structural monetary policy tools, including cutting the PSL rate by 0.25 percentage points, raising the quota for relending to support agriculture and small businesses by 500 billion yuan, of which the relending quota for private enterprises was raised by 300 billion yuan and the relending quota for technological innovation and industrial upgrading was raised by 200 billion yuan, with the "reimbursement" ratio raised from the original 60% to 100%.
At the same time, the fiscal authorities, together with the central bank and the National Financial Regulatory Administration, for the first time introduced an interest subsidy policy for certain first-home purchase loans tied to genuine housing demand.
Looking ahead, Wang Qing judges that after the above structural measures to stabilize growth and the housing market are introduced, a period of observing policy effects will follow. The likelihood of aggregate rate cuts following up in the short term has declined, and the pricing basis for LPR quotes will remain stable.
Credit pricing shifts to a "LPR+DR" dual anchor
As the central bank has orderly improved the short-end interest rate regulation mechanism, the benchmark status of the overnight rate DR001 has continued to rise. Starting in the second half of this year, some financial institutions began trying to use the DR rate as the pricing benchmark for floating-rate loans, which is also an important part of the central bank's interest rate marketization reform.
Speaking about the push to reform the loan interest rate pricing benchmark, Pan Gongsheng laid out clear arrangements: in the future, as diversified loan pricing benchmarks are continuously improved, some enterprises with strong financial capabilities may, after consultation with financial institutions, independently choose the interbank overnight repurchase rate or the Loan Prime Rate as the pricing benchmark for floating-rate loans, while the Loan Prime Rate can continue to play its role as the pricing benchmark for small business and personal loans.
The LPR is a quote-based rate with relatively high stability, while DR is a transaction-based rate with prominent market-oriented characteristics.
According to incomplete statistics, since the country's first DR001 benchmark rate loan landed in Hainan in July this year, more than 100 DR benchmark rate loans have been implemented across 24 provinces nationwide.
Wang Qing analyzes that the shift of credit pricing to a "LPR+DR" dual anchor means that the market-based pricing degree of some loan rates will be higher in the future. On the one hand, this helps improve the efficiency of monetary policy transmission and accelerate the transmission from policy rates to loan rates. On the other hand, it can better meet the financing needs of different market entities — for some large enterprises with large short-term working capital needs and strong financial capabilities, DR benchmark loans are better suited to their credit needs.
Authoritative market experts say that diversifying the anchor for loan interest rate pricing will help further raise the level of market-based pricing, unclog the monetary policy transmission channel, and attract high-quality enterprises to return to the credit market. At the same time, the development of the DR001-related derivatives market and the optimization of the LPR quoting mechanism will also become important directions for improvement in the next stage.
It is worth noting that because pricing by reference to DR001 carries certain thresholds and usually requires one-on-one negotiation and bargaining between banks and enterprises as well as agreement on contract details, it is relatively more suitable for large and medium-sized enterprises.
Therefore, the authoritative expert pointed out that financial institutions may negotiate independently with clients, focusing on guiding large and medium-sized enterprises with strong financial capabilities to choose DR001 as the pricing benchmark for floating-rate loans. Personal loans (including mortgages) and small and micro enterprise loans will continue to reference the LPR.
Conditions for DR001 as a new loan pricing benchmark are now fairly mature
At present, the spread between China's corporate bond financing rates and loan rates has widened markedly, and the substitution effect of direct financing for credit has become increasingly evident.
To adapt to the decline in bond yields, more and more loans are being issued at rates below the LPR. In the first half of this year, the share of loans issued below the LPR was close to 50%, significantly higher than the level at the time of the 2019 LPR reform.
Guo Lei, chief economist at GF Securities, believes that to adapt to the development of direct financing, maintain the guiding role of the LPR, and promote the comprehensive social financing cost to run at a low level, it is necessary for China's loans to gradually shift toward pricing based on multiple benchmark rates.
Beyond the LPR, if banks are willing to choose a certain market rate as a supplementary loan benchmark rate, in theory at least two conditions must be met: first, it can fully reflect banks' liability costs; second, its volatility is relatively low.
Internationally, the floating-rate loan pricing benchmarks of major developed economies have generally gone from a single quote-based rate to diversified benchmark rates including transaction-based rates.
For example, the United States initially used the prime rate (PR) formed by bank quotes as the loan pricing benchmark. After the 1980s, the London Interbank Offered Rate (LIBOR) became the main pricing benchmark for its floating-rate loans.
In 2017, the United States selected the Secured Overnight Financing Rate (SOFR), formed based on money market transactions, to replace LIBOR, which had the potential to be manipulated, forming a diversified benchmark rate system running in parallel with SOFR, PR, and Treasury yields.
Authoritative market experts believe that China's DR001 basically corresponds to the U.S. SOFR, and the conditions for it to serve as a new loan pricing benchmark are now fairly mature.
From the perspective of high-quality development, DR001 is formed based on real market transactions, has a relatively large trading volume, and enjoys relatively high market recognition. It is suitable to serve as a loan pricing benchmark and, together with the LPR, provide reference for loan pricing, while also helping to unclog interest rate transmission.
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