China Rates Underwhelmed by Recovery Bets Amid PBOC Easing Hopes
- Benchmark 7-day repo rate slumps to lowest in four months
- StanChart strategists expect PBOC to cut rates, RRR in 1H
The People's Bank of China (PBOC) building in Beijing.
Source: Bloomberg
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China’s short-term funding costs for banks slumped at the start of the year amid hopes the central bank would keep cash conditions loose to support the economy as it emerges from Beijing’s strict Covid curbs.
The benchmark seven-day repo rate fell to 1.36% this week, the lowest since September. Analysts see short-end rates staying anchored even if the demand for cash increases during Lunar New Year holidays toward month-end. That’s because they expect the People’s Bank of China to cut the reserve requirement ratio or even rates for banks as part of its plan to keep monetary policy targeted and “forceful” this year.