PBOC expected to cut benchmark lending rate LPR next week, RRR cut expected in coming months – CICC
MACRO POLICY & REGULATION VIEWS & ANALYSIS
PBOC expected to cut benchmark lending rate LPR next week, RRR cut expected in coming months – CICC
MACRO POLICY & REGULATION VIEWS & ANALYSIS

PBOC expected to cut benchmark lending rate LPR next week, RRR cut expected in coming months – CICC

 

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The PBOC on Tuesday cut the interest rates on MLF and reverse repo and the rate cut came earlier than market expected, sending a clear signal for stepped-up monetary policy easing, CICC said in a note. 

China’s benchmark lending rate LPR is expected to be reduced by on August 21, with 5-year LPR expected to be cut by a larger size than 1-year LPR in order to step up the support to the real estate market, it said. 

In addition, a 25 bps cut in banks’ reserve requirement ratio (RRR) is expected due to an expected liquidity gap in September due to credit injection and issuance of treasury bonds, it said. 

July’s financial data reflected weaker credit demand and the key to stimulating credit growth is to reduce corporate credit risk and improve the expectations of investment return, it said.