Market participants expect China to leave its benchmark lending rates unchanged in April, continuing a pause that would reach 11 months, according to a Reuters survey. The outlook for unchanged policy is tied to unexpectedly strong first-quarter growth and signs of reflation that have reduced the urgency for broad monetary stimulus.
Official data released this week showed China’s economy expanded by 5.0% in the first quarter, up from 4.5% in the prior quarter and sitting at the top of the government’s annual target range. That better-than-anticipated performance, combined with an uptick in inflationary pressures, prompted major investment banks to scale back earlier calls for interest-rate cuts and to revise expectations toward a steady policy stance.
The loan prime rate - or LPR - which typically reflects the rate charged to banks’ best clients, is set monthly after 20 designated commercial banks submit proposed rates to the People’s Bank of China (PBOC). In a Reuters poll of 20 market participants conducted this week, every respondent predicted the one-year and five-year LPRs would remain at 3.00% and 3.50% respectively at the next review on Monday.
Beyond headline growth, China’s producer prices showed a marked shift in March when factory-gate prices turned positive for the first time in more than three years. Analysts linked the reversal in part to rising import costs related to the Middle East crisis, adding to the reflationary signals seen across the data.
Commenting on the data, Lynn Song, ING’s chief economist for Greater China, noted that "stronger-than-expected first-quarter GDP data, combined with the recent reflationary trends, may keep the PBOC on hold until conditions warrant monetary policy support."
Raymond Yeung, chief economist for Greater China at ANZ, said that holding rates steady would align with the PBOC’s preference to adjust conditions via structural measures rather than across-the-board rate reductions while growth remains near target. The central bank has said it will maintain an "appropriately loose" monetary stance this year and indicated it will use tools such as cuts to reserve requirements and interest rates to ensure ample liquidity as needed.
The incoming data, analysts say, reduces immediate pressure for standard interest-rate easing while leaving room for targeted, structural measures to support credit and liquidity. The combined signals from GDP, producer prices and central bank guidance point to a cautious approach by policymakers as they weigh growth, inflation and external risks.