Story perspectives

China's PBOC Sticks to Cautious Policy Amid Inflation Shift

11/11/2025

Summary

PBOC Maintains Accommodative Policy

The People’s Bank of China (PBOC) is expected to maintain an accommodative monetary policy in November 2025 because headline inflation is low while core inflation is strengthening.
The PBOC's approach seeks to address structural vulnerabilities and financial stability risks in the economy.
Analysts note that mild inflation provides flexibility, but stronger core inflation reduces the need for aggressive rate cuts, signaling a cautious and balanced policy direction.

Summary

China's Inflation Returns

In October 2025, China's consumer price index rose 0.2% year on year, returning to inflation after two months of decline.
The producer price index fell 2.1% year on year in October 2025, an improvement from a 2.3% decline in September.
Analysts caution that deflationary pressures persist and further policy measures may be necessary to stimulate demand.
China's economy continues to face challenges, including weak domestic demand and trade uncertainties.

History

Historical Context

The Great Inflation of the 1970s, peaking in 1979, was marked by U.S. inflation rates exceeding 13% and significant economic turmoil. This period followed the 1973 oil crisis, which contributed to stagflation—a combination of high inflation and unemployment. Today, China's low headline inflation and rising core inflation reflect similar structural vulnerabilities, emphasizing the need for balanced monetary policies to ensure economic stability.

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PBOC Maintains Accommodative Policy

The People’s Bank of China (PBOC) is expected to maintain an accommodative monetary policy in November 2025 because headline inflation is low while core inflation is strengthening.
The PBOC's approach seeks to address structural vulnerabilities and financial stability risks in the economy.
Analysts note that mild inflation provides flexibility, but stronger core inflation reduces the need for aggressive rate cuts, signaling a cautious and balanced policy direction.

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