The latest Loan Prime Rate (LPR) figures have been released. The 1-year LPR stands at 3.0%, and the over-5-year LPR is 3.5%. These rates will remain effective until the next LPR announcement.

Since the LPR followed a 10-basis-point cut in the reverse repo rate in May 2025, interest rate tools have remained stable. With no further adjustments to the reverse repo rate through May 2026, the pricing basis for LPR quotations has remained unchanged, resulting in no change to the LPR for a full year. Currently, the spreads over the reverse repo rate for the 1-year and over-5-year LPR quotations are maintained at 1.6 basis points and 2.1 basis points, respectively. The unchanged LPR for both tenors in May aligns with overall market expectations. Beyond the stability of the pricing basis, it is noted that driven by relatively loose liquidity, key market interest rates, including the 1-year AAA-rated interbank certificate of deposit yield, have declined to some extent recently. The average 1-year AAA-rated interbank certificate of deposit yield in April fell to 1.47%, a record low, indicating a continued decrease in commercial banks' wholesale funding costs in the money market. Simultaneously, influenced by factors such as the repricing of some loans at the beginning of the year, the net interest margin of commercial banks stood at 1.40% at the end of the first quarter of 2026, down 0.02 percentage points from the end of the previous year, also reaching a historical low. This suggests that despite the recent decline in commercial banks' wholesale funding costs in the money market, from the perspective of stabilizing interest margins, quoting banks still lack the motivation to proactively reduce the LPR quotation spreads. Looking at the macroeconomic performance this year, data shows that the gross domestic product (GDP) for the first quarter of 2026 reached 33,419.3 billion yuan, a year-on-year increase of 5.0%, marking a good start. During the same period, the total value of goods imports and exports increased by 14.2% year-on-year, while total retail sales of consumer goods grew by 0.2% year-on-year, a deceleration of 1.5 percentage points from the previous month. Exports continued to grow strongly, while the momentum of domestic investment and consumption growth weakened. This may reflect monthly data fluctuations, and policymakers are expected to further observe economic trends, with macro policies likely to maintain their stance in the short term. Overall, monetary policy is currently in an observation period, which is the fundamental reason for the unchanged policy rates and LPR quotations in May. Since March 2026, market liquidity has remained ample, evolving further towards a looser bias after entering May. The central bank's various open market operations have shown a clear intent to withdraw liquidity. The weighted average interest rate for overnight pledged repo (DR001) was reported at 1.2830%, and the 7-day pledged repo (DR007) was at 1.3242%, slightly below the policy rate levels. Regarding the LPR, the central bank has also released recent signals. In its monetary policy execution report for the first quarter of 2026, the central bank stated the need to further improve the interest rate regulation framework, strengthen the guiding role of central bank policy rates, refine the market-based interest rate formation and transmission mechanism, leverage the role of the market interest rate pricing self-disciplinary mechanism, enhance the implementation and supervision of interest rate policies, reduce bank liability costs, guide financial institutions to improve interest rate pricing capabilities, and promote the low-level operation of comprehensive social financing costs. From a certain perspective, the central bank's emphasis on maintaining low financing costs rather than "reducing" them may indicate a continuation of a phase of prudent stance on aggregate rate-cutting tools. Meanwhile, a referenced column in the report discussing international experience with loan pricing benchmarks mentions overseas precedents for the evolution from a single loan pricing benchmark to a diversified one. This may correspond to future reforms in China's loan pricing methods, shifting from solely following the LPR to referencing more diversified benchmarks such as government bond yields. Regarding the direction of monetary policy in the next stage, it is noted that liquidity has remained ample since April. Although the funding cost center edged slightly higher in May, the overall loose stance remains unchanged. It is expected that commercial banks' liability costs will remain substantively low, providing a favorable financing environment for the real economy. Looking ahead, as the drag on the global economy from conflicts in the Middle East becomes apparent, and with significant uncertainty remaining regarding U.S. tariff policies, China's exports may face downward pressure in the second half of the year. Against the backdrop of real estate market adjustments, domestic consumption and investment demand also require further stimulation. At that time, policies aimed at stabilizing growth are likely to be intensified accordingly, with a higher possibility of implementing policy rate cuts. The estimated magnitude of such cuts could be around 10 to 20 basis points, which would subsequently lead to a follow-on reduction in LPR quotations.