March LPR Quotation Remains Unchanged; Experts: Policy Easing Pace Depends on Real Economy Recovery and Other Factors

What macroeconomic indicators are performing well behind the steady LPR quotes?

According to a report by Meiri: Zhang Shoulin Edited by 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 quotes are unchanged from the previous period. Wang Qing, Li Xiaofeng, and Feng Lin from Orient Securities 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 growth stabilization demand is not high.

CITIC Securities Chief Economist Ming Ming’s team analyzed that the policy stance remains clearly accommodative overall, 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 Under Observation

In March, the LPR for two tenors remained unchanged, in line with market expectations. Wang Qing, Li Xiaofeng, and Feng Lin from Orient Securities believe there are two direct reasons behind this.

First, the pricing basis for the LPR has not changed. Since the last LPR quote, the policy rate (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 interbank certificates of deposit, 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 still faces 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 adjustments to the LPR.

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

CITIC Securities Chief Economist Ming Ming’s team analyzed that, as of now, the central bank’s attitude toward aggregate tools remains “flexible and efficient use of RRR cuts and interest rate reductions,” while the intermediate target on prices is “to promote low overall financing costs in society.” Therefore, although the stance of total easing is clear, the pace of easing depends on the central bank’s flexible 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 various policy tools like RRR cuts and interest rate reductions, 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 Orient Securities analyze that, considering macroeconomic and financial trends comprehensively, the likelihood of implementing a comprehensive policy rate cut this year is high, expected around mid-year, with a reduction of 10 to 20 basis points, which will lead to a follow-up decrease in the LPR. “This will be an important move this year to boost consumption, expand investment, and effectively hedge against external uncertainties.”

The team from Orient Securities also believes that, influenced by geopolitical fluctuations and the continued push for anti-inflation policies, prices are expected to rise mildly in 2026, but CPI growth will remain low. There is ample room for monetary policy to remain moderately easing, including 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.

They also suggest that in 2026, efforts should be made to stabilize the real estate market. It is likely that regulators will guide a significant downward adjustment of 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 negative market expectations.

Ming Ming’s team from CITIC Securities believes 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 windows.

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 integrated 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 policy implementation and supervision, standardize financing costs, and promote low overall financing costs in society.