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The People’s Bank of China cut the rate on the 7-day reverse repo by 10 bps to 1.9% for the first since last August, and it also cut the rate on the Standing Lending Facility (SLF) by 10 bps, a surprise given the depreciation pressure on the yuan, the strong M2 growth and the little time left for banks to respond to the repricing of the deposit base, Citigroup said in a research note.
Citi said that the earlier-than-expected rate cut reflects the urgency of counter-cyclical adjustment and the efforts to stabilize economic growth by the PBOC, and the bank expected MLF and LPR to be cut by about 10 bps on June 15th and June 20t, respectively.
The market is also generally expecting the Chinese government to launch a series of broad stimulus measures as soon as this Friday, it said.