Economist at UOB Group HO Woei Chen, CFA, reviews the latest interest rate decision by the PBoC. Key Takeaways Chinese banks set the 1Y loan prime rat
Economist at UOB Group HO Woei Chen, CFA, reviews the latest interest rate decision by the PBoC.Chinese banks set the 1Y loan prime rate 10 bps lower at 3.45% while keeping the 5Y LPR unchanged at 4.20%. The move is largely disappointing considering the mounting growth risks in China’s economy. Bloomberg’s poll showed expectation of 10-15 bps cut for the 1Y LPR and 10-20 bps cut for the 5Y LPR in Aug.
We continue to expect banks to adjust their LPRs lower in the coming months. We also expect another 25 bps cut to banks’ reserve requirement ratio in 3Q23. Our forecast for the 1Y LPR is now at 3.40% end-3Q23 and 3.35% end4Q23 while our forecast for the 5Y LPR is at 4.05% end-3Q23 and 4.00% end4Q23.
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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