China: PBoC cuts rates to support growth – UOB – by pabspiovano PBOC China InterestRate CentralBanks Banks
UOB Group’s Economist Ho Woei Chen, CFA, and Senior FX Strategist Peter Chia, review the latest decision by the PBoC.The PBOC cuts the 7-day reverse repo rate by 10bps to 1.9% from 2.0% ahead of the announcement of the benchmark 1Y MLF rate this Thu . The 7-day reverse repo rate and 1Y MLF rate were last cut by 10bps in Aug 2022.
For the rest of the year, we do not anticipate additional interest rate cuts after the 10bps in Jun unless economic conditions continue to worsen. Nonetheless, we maintain our forecast for a 25bps reduction in banks’ reserve requirement ratio in 2H23 to release more long-term funding into the banking system. This may be used to partly replace the CNY2.9 tn of 1Y MLF maturing in 2H23
We maintain our growth forecast for China at 5.6% in 2023 with 2Q23 at 7.8% y/y against the low base during Shanghai’s two-month Covid-19 lockdown in 2Q22. If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
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