China’s PBOC keeps 1-year and 5-year benchmark lending rates unchanged

China has kept its benchmark lending rates unchanged for 11 months in a row and kept its holdings dry as policymakers weighed the economic effects of the Middle East war against resilient growth at home and waning deflationary pressure that has given Beijing less urgency to act.

The People’s Bank of China left its loan interest rate, or LPR, unchanged on Monday as rising global oil prices amid rising tensions in the Middle East pushed up energy prices and clouded the growth outlook.

The one-year LPR, the benchmark for new loans, was kept at 3.0%, while the five-year LPR, the benchmark for mortgage rates, remained unchanged at 3.5%.

The decision came after the world’s second-largest economy grew 5% in the first quarter, accelerating from 4.5% in the previous quarter, reaching the top of its full-year target range. Beijing lowered its 2026 growth target to a range of 4.5% to 5%; This is the least ambitious target recorded since the 1990s.

China’s ex-factory prices also rose for the first time in more than three years, rising 0.5 percent in March from a year earlier; This signaled that import cost pressure was starting to seep into the economy. Consumer inflation rose 1.3% in February, the biggest increase in more than three years, before falling to 1% in March.

Optimistic growth in early 2026 has reduced pressure on additional stimulus, leading economists to push back on rate cut expectations.

Yu Song, chief China economist at UBS Securities, said policymakers will likely adopt a “wait-and-see” approach, with rising inflation reducing the PBOC’s incentive to cut policy rates or launch major expansion in the near term.

“The government may also need time to evaluate the impact of external uncertainties amid conflicts in the Middle East,” Song added.

PBOC says it will continue this policy “supportive” and “moderately loose” A monetary stance was implemented this year to support growth while keeping the currency stable.

Speaking at the International Monetary Fund meeting in Washington last week, Chinese central bank governor Pan Gongsheng warned of rising geopolitical tensions, protectionism and trade barriers. focused on global growth and increased volatility in financial markets. Pan called for deeper international policy coordination to maintain macroeconomic and financial stability.

Chinese finance minister Lan Fo’an also reiterated Beijing’s call to expand domestic demand and increase consumption while providing more supply. “global public goods” for common benefits.