According to ING’s Lynn Song, recent data from China indicates stronger-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) figures for April, coupled with resilient export performance. Both exports and imports surpassed market forecasts, reinforcing a reflation narrative within the Chinese economy [1]. This momentum has reduced the immediate urgency for the People’s Bank of China (PBoC) to implement monetary easing measures, specifically interest rate cuts [1].
Despite the positive data, domestic demand in China remains soft. ING maintains that the next policy move from the PBoC is still expected to be a rate cut, but the timeline for such action has likely been pushed into the second half of 2026, unless there is a significantly sharper-than-expected deterioration in economic activity data [1]. The report also notes that higher input costs for producers, driven by energy prices, may eventually feed through the broader economy, supporting the reflation trend but potentially beginning to weigh on growth in the coming months [1].
Unlike many central banks globally, the PBoC is more likely to cut rates than hike them in the future. However, the current start to the year, combined with ongoing reflation momentum, is expected to keep the central bank on pause for now [1].
CONCLUSION
Stronger-than-expected inflation and trade data in China have delayed expectations for a near-term PBoC rate cut. ING now anticipates any easing move will likely occur in the second half of 2026, unless economic conditions deteriorate sharply.