PBoC: Easing cycle over? – UOB

Economist at UOB Group Ho Woei Chen, CFA, gives her opinion on the latest PBoC event.

Key Quotes

“In line with market’s expectation, the People’s Bank of China (PBoC) kept its Loan Prime Rate (LPR) unchanged in September with the 1Y LPR and the 5Y & above LPR set at 3.85% and 4.65% respectively. The central bank has maintained the LPR steady since May following 30 bps cut in the earlier part of the year.”

“Economic data in July and August suggest that the full-year GDP growth in China is on track for our forecast of 1.8% or even surpass it if the momentum picks up further. With the acceleration in economic recovery, the pressure to ease monetary policy further has been greatly reduced which will now allow the PBoC to pay attention to financial risks mitigation ahead.”

“While we do not expect the PBoC to lower interest rates further, the central bank is still expected to continue to maintain strong market liquidity through its open market operations while also continuing to implement its relending facility as well as credit loans to the small and micro businesses via temporary purchase of uncollateralized loans as highlighted by the PBoC at a meeting in August.”