As posted earlier, the PBOC cut two policy rates on Tuesday:
Expectations are that the Bank will also cut the rate on the 1 year Medium-term Lending Facility (MLF) tomorrow, Thursday, 15 June 2023. There is 200 bn yuan of a maturing MLF expected to be rolled over, if not added to. The current MLF rate is 2.75% and this is expected to be trimmed by 10 bp. This would be the first cut in 10 months.
ING, say yes, probably:
- After all, window guidance on deposits was also lowered earlier in the month, so there does seem to be a general easing of policy going on
ING add, on the yuan:
- The Chinese yuan has weakened ... adding to the month and a half of weakness it has already experienced. Further stimulus may prompt some short-term reversals, or slow the slide. But it may take a more concerted improvement in the macro data before the CNY turns decisively.
- Short of a substantial boost from fiscal policy, such as loans from the central government to local governments to spur infrastructure spending, that doesn't look on the cards just yet, though today's move does indicate that the authorities' patience with the weak recovery is wearing thin.
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Also, watch out for the PBOC Loan Prime Setting (LPR) to follow on the 20th, the following Tuesday.
Currently:
- one-year LPR 3.65%
- the five-year LPR 4.3%
Expectations are for an LPR cut also:
People's Bank of China Governor Yi Gang and Federal Reserve Chair Powell
