Stabilization Stance Continues: LPR Held Steady as Monetary Policy Front-Loads Support for Growth

LPR Held Flat for a Third Month, Easing Window Not Yet Open On August 20, the People's Bank of China authorized the National Interbank Funding Center to publish the latest LPR: the 1-year LPR at 3.00% and the over-5-year LPR at 3.50%, both unchanged from the prior month and the third consecutive month of stability. The market had hoped for adjustments to outstanding mortgage rates and incremental cuts, but the outcome reflects both protection of banks' net interest margins and restraint in policy pacing. Analysts note that before the Fed's September meeting, the yuan exchange rate and the China-US rate differential are important external constraints; easing too early could amplify capital-flow and exchange-rate volatility, making "staying put" the better near-term choice. Open-Market Net Injection Keeps Liquidity Ample Despite the steady LPR, the central bank has been anything but passive on liquidity. In the second half of August, it achieved a full-month open-market net injection of over 600 billion yuan through reverse repos and an oversubscribed MLF rollover; overnight and seven-day repo rates in the interbank market stayed near policy rates, with overall loose conditions. More notably, the PBOC recently restarted and expanded several structural monetary tools — including science-and-technology innovation re-lending, equipment-upgrade special re-lending and the inclusive small-business loan support tool — steering financial resources precisely toward key areas and weak links, embodying a "stable aggregate, optimized structure" approach. Pro-Growth Combo: Fiscal and Monetary Coordination On the policy front, pro-growth is shifting from sole monetary easing to "fiscal + monetary" coordination. On one side, issuance and deployment of ultra-long special treasury bonds and local government special bonds have accelerated, funding major projects and the "two new" (equipment upgrades, trade-in) areas. On the other, monetary policy supports by lowering comprehensive financing costs for the real economy and smoothing transmission. This coordination is especially visible in property: multiple cities have eased purchase limits and introduced "trade-in" home subsidies, combined with the over-5-year LPR at a historic low, aiming to cushion reasonable housing demand — yet the bottom line of "houses are for living, not speculation" remains intact. External Constraint: The Fed and Exchange Rate Another constraint on monetary policy comes from abroad. New Fed Chair Warsh is set to deliver his first major policy speech at Jackson Hole, and the market remains divided on a September cut; US core PCE and employment data will be the key variables. If the dollar stays weak and Treasury yields fall, more autonomous space opens for China's monetary policy. Conversely, if external inflation rebounds and forces the Fed to hold high rates, yuan depreciation pressure could limit the easing pace. Thus, while "putting ourselves first," the central bank also closely watches internal-external balance to avoid policy overshooting. Outlook: Easing Possible in Q4 but Gentle in Force Synthesizing institutional views, there remains room for further monetary easing this year, but the pacing and force will stay gentle and restrained. If domestic demand recovery falls short of expectations and prices stay low, a reserve-requirement cut and an asymmetric LPR guide-down cannot be ruled out to shore up growth; structural tools will keep expanding, prioritizing technology, green and inclusive areas. For the market, the certainty is that "pro-growth will not fall short"; the uncertainty lies in the timing and form of delivery — which is precisely why investors must grasp the main thread amid volatility and remain patient.