China’s central bank just pushed borrowing costs to a level the country has never seen before. The People’s Bank of China cut its one-year medium-term lending facility rate to 1.5%, shaving 5 basis points off the previous 1.55% set in December 2025.
The numbers painting the picture
Two data points stand out. Industrial output growth has decelerated to its slowest pace since 2023. Retail sales growth, meanwhile, is at its weakest level in four years.
The MLF rate cut is the latest in a series of easing moves. The one-year loan prime rate, which serves as the benchmark for most new loans in China, has been sitting at a record low of 3.0% since May 2025. The five-year LPR, which underpins mortgage pricing, has held steady at 3.5% over the same period.
Neither LPR moved this time around. Market consensus suggests the one-year LPR is unlikely to see further cuts through at least May 2026.
