China: Downward price pressures continue – UOB Group

FXStreet Insights Team FXStreet

China’s CPI rose at a weaker-than-expected pace in June. Amid further easing by the PBOC, it is expected that the 1Y loan prime rate (LPR) will fall to 3.20% by end-4Q24 (current 3.45%), UOB Group Economist Ho Woei Chen notes.

PBOC's 1Y loan prime rate to fall to 3.20%

“China’s CPI rose at a weaker-than-expected pace in Jun. PPI deflation eased to its smallest pace in 17 months due mainly to base effect.”

“We lower our price expectation for this year. Our revised forecast for CPI is at 0.3% (from 0.7%) and PPI at -1.3% (from -1.0%) for 2024.”

“Amid further easing by the PBOC, we expect the 1Y loan prime rate (LPR) to fall to 3.20% by end-4Q24 (current 3.45%). We also think there is a possibility of another 50 bps cut to the reserve requirement ratio (RRR) in 2H24.”

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