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The Fed’s surprise move has increased expectations of rate cuts by other central banks, including the People’s Bank of China (PBoC). Analysts at Standard Chartered Bank expect the PBoC to ease but at its own pace.

Key quotes

“We believe China will continue to ease policy to revive business activity, but cutting in the medium-term lending facility (MLF) rate two months in a row is less likely.”

“We expect the PBoC to rotate between cuts to the reserve requirement ratio (RRR) and MLF rate near-term.” 

“We estimate that the targeted RRR cut will unlock liquidity up to CNY 300bn, equivalent to a 15bps broad RRR cut, allowing the PBoC to save the MLF rate cut for Q2, likely in April.”

“We think the window for a benchmark deposit rate cut will open in Q2, at the earliest, if production fails to return to normal capacity by end-March, or if a global recession becomes a real risk.”