SHANGHAI, March 19 (Reuters) – China is expected to keep benchmark lending rates steady for the 10th consecutive month in March on Friday, a Reuters survey showed, as rising global oil prices driven by heightened Middle East tensions add uncertainty to the inflation outlook.
Beijing’s 2026 economic growth target of 4.5% to 5%, slightly below last year’s 5% expansion, along with better-than-expected economic activity data in the first two months, have reduced the urgency to roll out stimulus to support the broad economy, market watchers said.
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 respondents expected both the one-year and five-year LPRs to remain steady on Friday at 3.00% and 3.5%, respectively.
Global oil prices have risen about 50% since the beginning of the U.S. and Israeli war with Iran, triggering an oil shock that has jolted global financial markets.
“A moderate and temporary rise in oil prices is likely to have a limited impact on China’s economy,” analysts at Standard Chartered said in a note.
“However, a further escalation of the Middle East conflict – especially if supply of key commodities is tightened – would spill over to global supply chains and demand, ultimately weighing on China’s exports and growth.”
They now expect China to delay rolling out monetary stimulus, pushing back a previously forecast 25-basis-point cut in the reserve requirement ratio (RRR) to the second quarter from the first, and a 10-basis-point policy rate cut to the third quarter from the second, due to rising geopolitical risks.
Marco Sun, chief financial market analyst at MUFG (China), however, said China remained well insulated from energy price shocks given its sufficient energy reserves.
“Energy shocks are unlikely to materially affect the PBOC’s monetary policy stance,” Sun said.
“The central bank will maintain an accommodative monetary policy and adjust key benchmark rates to offset domestic pressures that drive up financing costs.”
The strong expectations for steady LPR fixings also come as major global central banks stand pat on rate decisions.
The U.S. Federal Reserve and Bank of Canada struck hawkish tones at their policy reviews on Wednesday, as the Iran war drives energy prices sharply higher and threatens a renewed wave of inflation.
(Reporting by Shanghai Newsroom; Editing by Jacqueline Wong)
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