China Holds Rates Steady After Hitting 5% Growth Target, Easing Expected in Q1

Beijing — The People's Bank of China (PBOC) kept its benchmark lending rates unchanged on Tuesday, favoring stability as it digests mixed economic data from the close of 2025.

Key Data Points

• LPR Decision: The 1-year Loan Prime Rate (LPR) remains at 3.0%, and the 5-year LPR stays at 3.5%.
• 2025 Scorecard: China achieved its annual GDP growth target, posting a 5.0% expansion for 2025. Industrial output remains robust (+5.2%), fueled by high-tech manufacturing and AI exports.
• Consumption Drag: Retail sales data signaled lingering weakness, growing only 0.9% in December, highlighting the persistent drag from the property sector and cautious household spending.

Easing on the Horizon

Despite the hold, the policy outlook for 2026 is dovish. With the central government emphasizing “moderately loose monetary policy” for the year ahead, market consensus firmly points to a cut in the Reserve Requirement Ratio (RRR) and potential rate reductions later in Q1 2026. The central bank is expected to prioritize liquidity injections to support the housing market and stimulate domestic demand.