China to keep benchmark lending rates steady after strong GDP data
Its economy is weathering the Iran war better than others, prompting banks to walk back calls for rate cuts
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[SHANGHAI] China is expected to leave benchmark lending rates unchanged for an 11th consecutive month in April, a Reuters survey showed, as robust first-quarter growth and a pickup in inflation have weakened the case for additional monetary stimulus.
On Thursday (Apr 16), China’s economy logged 5 per cent growth, at the top of its full-year target range and picking up from 4.5 per cent in the previous quarter.
Even before the gross domestic product figures were released, it was evident that the world’s No 2 economy was weathering the Iran war better than others, prompting major investment banks to walk back calls for rate cuts.
They now expect China to keep official interest rates steady in 2026.
The loan prime rate (LPR), normally charged to banks’ best clients, is calculated each month after 20 designated commercial banks submit proposed rates to the People’s Bank of China (PBOC).
In a Reuters survey of 20 market participants this week, all of the respondents predicted that at the next review on Monday, the one-year and five-year LPRs would remain steady at 3 per cent and 3.5 per cent respectively.
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In addition to the upbeat GDP figures, China’s factory-gate prices in March turned positive for the first time in more than three years, signalling rising import cost pressures linked to the Middle East crisis.
Lynn Song, ING’s chief economist for Greater China, said in a note: “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, noted that keeping rates steady would be “consistent with the PBOC’s preference to manage conditions via structural tools, rather than rate cuts, while growth remains near target”.
China’s central bank has said it will maintain an “appropriately loose” monetary stance in 2026, deploying tools – including cuts to reserve requirements and interest rates – to keep liquidity ample. REUTERS
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