China has kept its key lending rates unchanged for the sixth consecutive month, maintaining the 1-year loan prime rate (LPR) at 3.1% and the 5-year LPR at 3.6%. This decision, in line with market expectations, reflects a cautious stance by the People’s Bank of China (PBOC) as it balances economic growth with efforts to stabilize the yuan under increasing pressure from U.S. tariffs.
The move comes after stronger-than-expected economic data for Q1, with GDP rising 5.4% year-on-year and March figures for retail sales and industrial output also exceeding forecasts. These results have reduced immediate pressure for monetary easing, though analysts expect more targeted stimulus in the months ahead, particularly for exporters facing trade headwinds.
Despite deflationary trends - with March consumer prices down 0.1% and producer prices falling 2.5% - the central bank is hesitant to cut rates further. Concerns include a weakening yuan, shrinking bank margins, and potential capital outflows if currency depreciation is used to offset economic challenges.
Economists note that further rate adjustments are unlikely without a cut to the 7-day reverse repo rate, currently at 1.5%. Many expect the PBOC to wait for a potential rate cut by the U.S. Federal Reserve before moving to ease policy, aiming to avoid excessive pressure on the Chinese currency amid escalating trade tensions.