PBoC: Targeted easing over broad cuts – DBS

DBS Group Research expects the People’s Bank of China (PBoC) to keep the 1-year Loan Prime Rate at 3.00% as Chinese growth has firmed and price dynamics improved. The report notes external demand is supporting industrial activity while domestic momentum is uneven. Analysts see limited urgency for broad-based easing, with policymakers likely to stick to targeted measures despite energy and supply chain risks.

LPR seen on hold as growth firms

"The PBoC is expected to keep the 1-year Loan Prime Rate (LPR) unchanged at 3.00%, as growth picked up from 4.5% yoy in Q425 to 5.0% in Q126, indicating a firmer start to the year."

"External demand continues to anchor industrial activity, while domestic momentum remains uneven—consumption, investment, and credit demand are still soft, weighed down by ongoing property sector stress and anti-involution."

"At the same time, improving price dynamics have lowered the urgency for near-term easing, even as higher energy costs and supply chain disruptions pose downside risks."

"With no clear signs of a sharp slowdown and credit demand yet to recover meaningfully, policymakers are likely to stay with targeted easing rather than shift toward broad-based rate cuts."

"As Indonesia and the Philippines navigate a shifting global macroeconomic environment, their central banks are increasingly aligned in confronting inflation dynamics, capital flow volatility, and exchange rate pressures.We expect both central banks to keep rates unchanged at 4.75% and 4.25% respectively."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)