US banks reduce interest rate cut expectations in China

Some of the largest American banks raised their inflation expectations in China this year, and reduced their expectations for a Chinese interest rate cut, as the escalation of the Iran war led to a rise in oil prices.

Bank of America joined other Wall Street banks, such as Citigroup and Goldman Sachs, in expecting a faster increase in consumer and wholesale prices in China during 2026, compared to previous expectations, according to a report published yesterday.

The sharp rise in the cost of energy also reduces the possibility of monetary easing in the coming months, as economists at Bank of America retreated from their expectations of cutting the interest rate twice by a total of 20 basis points this year.

The experts said: “We see that (monetary) policy is moving towards a wait-and-see position. There is less need for immediate monetary relief, but there is a greater ability to respond quickly and decisively if external or domestic demand unexpectedly weakens, or if financial conditions tighten.”

For its part, Citigroup, which had previously expected interest cuts to resume in the third quarter of this year, expected to cut interest once by 10 basis points in the second half of 2026.