China bigger than expected rate cut: PBoC likely to remain on dovish tilt in coming months

The news from earlier ICYMI:

• PBOC Rate CUT ___ (LPR): 1-year 3.45% (prior 3.45%) 5-year 3.95% (prior 4.20%)
• China's largest ever cut to its benchmark reference rate for mortgages
• Onshore yuan trades at its weakest against dollar since November last year

• China makes historic cut to benchmark mortgage rates - analyst says its a bit late

Snippet from ING in their response to the cut, noting a few firsts:

• Given the RMB depreciation pressure amid unfavourable interest rate spreads, we saw limited room for manoeuvre before global central banks shifted toward rate cuts.
• While single-sided LPR cuts have occured in the past, it was always the 1-year rate that was cut while the 5-year rate was maintained.
• The February decision was the first time since the LPR came into use in 2019 that the PBOC cut the 5-year LPR while keeping the 1-year LPR unchanged.
• The 25bp cut was also the largest cut to the 5-year LPR on record.

And, ING looks ahead:

• With inflation low and economic momentum still tepid in early 2024, we believe that monetary policy will remain accommodative in China moving forward. We still see room for one more cut to the key 1-year LPR in near term, and a further reserve ratio requirement cut is possible as well. If global central banks do begin rate cuts later in the year, that will likely free up more room for the PBoC to ease policy further.