China: Reflation momentum delays PBoC cuts – ING

ING’s Lynn Song notes that stronger China Consumer Price Index (CPI) and Producer Price Index (PPI) data in April, alongside resilient exports, reinforce a reflation narrative that reduces urgency for People’s Bank of China (PBoC) easing. While domestic demand remains soft and the next policy move is still expected to be a cut, ING now sees this likely pushed into the second half of 2026.

Reflation and exports ease policy pressure

"We saw in the weekend data that China's trade growth beat expectations again in April, with both exports and imports surpassing market forecasts."

"Assuming we do not see a timely fall in energy prices, these higher input costs for producers will likely feed through the broader economy in the coming months, fuelling the reflation narrative but also beginning to drag on growth."

"This start to the year, combined with the recent reflation momentum, will likely keep the People’s Bank of China on pause for now."

"Unlike many central banks globally, China's next move remains more likely to be a cut than a hike."

"It looks increasingly likely that such a move won't happen until at least the second half of the year, barring a significantly sharper-than-expected deterioration in activity data ahead."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)