DBS Group Research expects the People’s Bank of China to keep the 1-year Loan Prime Rate unchanged at 3.00%. It cites firmer growth and improved price conditions.
The report says growth rose from 4.5% year on year in Q4 2025 to 5.0% in Q1 2026. It adds that external demand is supporting industrial activity.
It states that domestic demand is uneven, with consumption, investment, and credit demand still weak. It links this to property sector stress and anti-involution.
The report says there is less need for near-term easing, while higher energy costs and supply chain disruption remain risks. It expects policymakers to rely on targeted measures rather than broad rate cuts.
Separately, it expects Indonesia and the Philippines to keep policy rates unchanged at 4.75% and 4.25% respectively. It cites inflation trends, capital flow swings, and exchange rate pressure.
With the People’s Bank of China expected to hold the 1-year Loan Prime Rate at 3.00%, we should anticipate low volatility in Chinese interest rate swaps for the coming weeks. The recent Q1 2026 GDP growth of 5.0% gives policymakers cover to avoid broad-based cuts. The latest industrial production figures for March 2026, which showed a 6.1% year-on-year increase, confirm that external demand is offsetting domestic weakness for now.
This split between strong exports and soft local demand suggests a cautious approach to trading equity indices. While domestic consumption remains weak, as evidenced by new home prices falling 0.5% in March, the tenth straight monthly decline, export-oriented sectors are likely to outperform. This environment is not conducive to aggressive, directional bets on the overall market.
Given this outlook for stability, selling options on the USD/CNH currency pair could be a viable strategy. The CNH volatility index is already trading near its 12-month low of 4.2, indicating that the market does not expect sharp movements in the Yuan. This policy predictability reinforces the case for strategies that profit from a range-bound currency.
The PBoC’s steady hand is a continuation of the targeted policy approach we observed throughout 2025, when they also resisted calls for aggressive, widespread easing. This historical precedent strengthens our view that a surprise rate cut is highly unlikely in the near term. Therefore, positions that depend on a sudden dovish pivot from the central bank carry significant risk.
Elsewhere in the region, the central banks of Indonesia and the Philippines are also expected to keep their policy rates unchanged at 4.75% and 4.25% respectively. Indonesia’s latest inflation print of 2.9% for March 2026 sits comfortably within the central bank’s target range, justifying a wait-and-see approach. This regional trend towards stability should temper expectations for dramatic currency or rate moves across Southeast Asia.
