Following Federal Reserve Chairman Jerome Powell’s recent speech hinting at slower interest rate hikes, the market expects that China’s central bank will likely follow suit and cut its interest rate, 21st Century Business Herald reported.
Previously, a cut in the Reserve Requirement Rate — the minimum amount of reserves held by a commercial bank —had been widely expected. Interest rate cuts remain less discussed because of potential pressure on yuan depreciation.
Analysts think the central bank is unlikely to lower the deposit and loan benchmark interest rate, but the open market operations rate could be adjusted.
Taking Spring Festival and the Two Session into consideration, the central bank could launch the rate cut by the end of the first quarter or the beginning of the second quarter, said Ming Ming, the chief fixed-income analyst at CITIC Securities.
It should be noted that the interest rate cut earlier refers to lowering the benchmark interest rate for deposits and loans. However, in recent years, with the use of structural monetary policy, interest rate cuts include the central bank’s OMOs, MLF, PSL and other interest rate cuts in China.