Head of Research at UOB Group Suan Teck Kin, CFA, reviewed the PBoC’s monetary conditions and potential moves for the current year.
“China’s Loan Prime Rate (LPR) for both the 1Y and 5Y & above tenures were unchanged at the monthly fixing [on Monday], at 4.15% and 4.80% respectively. This is the second straight month that the rates were left untouched despite the 50 bps cut to banks’ reserve requirement ratio (RRR) earlier this month”.
“Overall, we continue to see a downward trajectory for the LPR towards the Medium-term Lending Facility (MLF) which is currently at 3.25%, as intended by the central bank when the reform was engineered back in August”.
“Coming on the back of the Phase One trade deal with the US, China’s December economic data and 4Q19 GDP pointed to a stabilizing outlook in 2020. We forecast 2020 GDP growth at 5.9% compared to 6.1% in 2019.”
“After the 150 bps cut in banks’ RRR in 2019 and another 50 bps cut in January 2020, the PBoC said last week that there is limited room for further reductions. We still see room for a 50 bps RRR cut in 2Q20, after the annual National People’s Congress (NPC) that opens on 5 March. The magnitude and timing of the move will depend on incoming economic data.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.