Loan Prime Rate Unchanged for 16th Consecutive Month

On September 20, the latest Loan Prime Rate (LPR) was announced. According to the National Interbank Funding Center, authorized by the People's Bank of China, the 1-year LPR stood at 3.0% and the over-5-year LPR at 3.5% as of September 20, 2026. Both rates remained unchanged from the previous month, marking the 16th consecutive month without adjustment.

The stability of the LPR this month was broadly in line with market expectations. On one hand, the current policy rate, namely the 7-day reverse repurchase operation rate, has remained at 1.4% since last May, meaning the pricing basis for the LPR has not shifted. On the other hand, given the ongoing pressure on net interest margins, commercial banks still lack sufficient incentive to proactively adjust their LPR quote spreads.

Recent data from the National Financial Regulatory Administration shows that, as of the end of the second quarter of 2026, the overall net interest margin of commercial banks stood at 1.41%, up one basis point from the first quarter but still within a historically low range.

Where things stand now

"There is currently no strong need to directly adjust the policy rate downward," said Wen Bin, chief economist at Minsheng Bank, in an interview with Securities Daily. "China's economic fundamentals remain resilient, and the supportive role of actual lending rates persists. Moreover, with support from government bonds and new policy-based financial instruments, monetary policy may continue to focus on liquidity support in the near term."

Dong Ximiao, chief economist at China Lianhe Credit Rating, also commented to Securities Daily that the domestic macroeconomy currently demonstrates a certain degree of resilience. With GDP growth of 4.7% year-on-year in the first half of 2026, within the annual target range of 4.5% to 5.0%, and with previously introduced policies still in an observation period, the urgency for an LPR cut is currently limited.

Looking ahead

Looking ahead, Wang Qing, chief macro analyst at Dongfang Jincheng, expects that the People's Bank of China may implement policy rate cuts, which could subsequently lead to a downward adjustment in LPR quotes. Despite recent tightening in the external financial environment, domestic monetary policy is likely to maintain a moderately accommodative stance, which will have a limited impact on the central bank's ability to cut rates.

In Wen Bin's view, the recent stable performance of the domestic bond market and the steady appreciation of the RMB exchange rate reflect the high safety attributes of Chinese assets, which supports the central bank's independent monetary policy direction. Future adjustments to the policy rate will depend on economic fundamentals and the net interest margins of commercial banks, with the LPR likely to follow the movement of the policy rate accordingly.