The March LPR quotation results remain unchanged; experts say the pace of policy easing depends on the recovery of the real economy and other factors.

Everyday Economic News Reporter | Zhang Shoulin Everyday Economic News Editor | Huang Bowen

On March 20, the People’s Bank of China authorized the National Interbank Funding Center to announce that the loan prime rate (LPR) for the day was: 1-year LPR at 3.0%, and over 5 years at 3.5%. These LPRs are valid until the next release.

The latest rates are unchanged from the previous period. Wang Qing, Li Xiaofeng, and Feng Lin from Dongfang Jincheng jointly believe that since the beginning of the year, LPR quotes have remained steady, mainly because the macroeconomic start in 2026 has been strong, and current demand for stabilizing growth is not high.

CITIC Securities Chief Economist Ming Ming and team analyze that the policy stance on total easing is clear, but the pace of easing depends on the central bank’s assessment of the recovery of the real economy and the progress of broad credit.

Current Monetary Policy is in an Observation Period

In March, the LPR quotes for two maturities remained unchanged, in line with market expectations. Wang Qing, Li Xiaofeng, and Feng Lin from Dongfang Jincheng believe there are two direct reasons.

First, the pricing basis for the LPR has not changed. Since the last LPR quote, the policy rate (the 7-day reverse repo rate) has remained stable, indicating that the basis for March’s LPR has not changed, largely suggesting that the LPR will stay steady this month.

Second, there is currently little motivation to actively lower the LPR. Due to the central bank’s large-scale liquidity injections via MLF (Medium-term Lending Facility) and reverse repos before the Spring Festival, including 1.9 trillion yuan of medium-term liquidity, major medium- and long-term market rates, such as the yield on 1-year AAA-rated bank CDs, have slightly declined. However, recent data shows that the net interest margin of commercial banks at the end of Q4 2025 remains at a historic low of 1.42%. Considering the re-pricing of loans at the start of the year, the net interest margin in Q1 2026 may face some narrowing pressure. This means that the recent slight decline in wholesale funding costs for commercial banks has not yet been enough to prompt active lowering of the LPR.

Wang Qing, Li Xiaofeng, and Feng Lin believe that since the beginning of the year, the unchanged LPR is mainly due to the strong macroeconomic start in 2026, driven by the significant surpassing of export expectations at the beginning of the year, the comprehensive improvement in domestic consumption and investment in January and February, and the rapid development of new productive forces including high-tech manufacturing. These factors indicate that the macroeconomic foundation is solid, and the current demand for growth stabilization is not high. Additionally, in January, the People’s Bank of China introduced a package of structural monetary policies to strengthen support for key sectors like technological innovation and small micro enterprises. All these suggest that monetary policy remains in an observation phase, with stable policy rates and LPR quotes in the first quarter.

CITIC Securities Chief Economist Ming Ming and team analyze that, as of now, the central bank’s attitude toward aggregate tools remains “flexible and efficient use of RRR cuts and interest rate cuts,” while the goal on the price side is “to promote low overall financing costs in society.” Therefore, although the stance on total easing is clear, the actual pace depends on the central bank’s assessment of the recovery of the real economy and the progress of broad credit. “Looking at the macroeconomic data released in March, indicators such as inflation, exports, credit, and overall economic performance show bright spots. In other words, the urgency to cut interest rates may not be high.”

Continue to Implement Moderate Easing Monetary Policy

The government work report this year mentions continuing to implement a moderately easing monetary policy. It emphasizes promoting stable economic growth and reasonable price increases as key considerations, flexibly and efficiently using tools like RRR cuts and interest rate cuts, maintaining ample liquidity, and aligning social financing scale and money supply growth with economic growth and inflation expectations.

Wang Qing, Li Xiaofeng, and Feng Lin from Dongfang Jincheng analyze that, considering macroeconomic and financial trends comprehensively, the likelihood of implementing a comprehensive interest rate cut policy this year is high, expected to be realized around mid-year. The cut could range from 10 to 20 basis points, which would then lead to a follow-up decrease in the LPR. “This is an important move to boost consumption, expand investment, and effectively hedge against external uncertainties this year.”

The team from Dongfang Jincheng also predicts that, influenced by geopolitical fluctuations and the continued push for anti-inflation policies, prices will rise moderately in 2026, but CPI (Consumer Price Index) growth will remain low. There is ample room for monetary policy to remain moderately easing, including interest rate cuts. Additionally, the Federal Reserve is expected to further cut rates in 2026, and the impact of exchange rate factors on domestic monetary policy adjustments is diminishing.

The team also suggests that in 2026, efforts should be made to stabilize the real estate market. It is likely that regulators will guide a significant reduction in the 5-year and above LPR quotes, combined with fiscal subsidies, to promote larger reductions in mortgage rates. This is a key step to address the current high mortgage rates, stimulate housing demand, and reverse market expectations.

CITIC Securities Chief Economist Ming Ming and team believe that the central bank’s easing cycle will likely continue, but with the impact of input-driven inflation factors like oil prices, the use of total easing tools may focus more on appropriate timing.

The “Daily Economic News” reports that on March 19, the People’s Bank of China announced it will continue to implement a moderately easing monetary policy. It emphasizes promoting stable economic growth and reasonable price increases, leveraging both incremental and stock policies, as well as the integration of monetary and fiscal policies. It will use tools such as reserve requirement ratio adjustments, government bond operations, MLF, and reverse repos to maintain ample liquidity, aligning social financing and money supply growth with economic and inflation targets. It will also guide and regulate interest rates based on economic and financial conditions, strengthen the implementation and supervision of interest rate policies, standardize financing intermediary costs, and promote low overall financing costs in society.

Cover image source: Daily Economic News