Further rate cuts likely by the PBoC – UOB

In the opinion of Economist Lee Sue Ann at UOB Group, the PBoC is expected to cut both its 1-Year and 5-Year Loan Prime Rate (LPR) at its event on Friday.

Key Quotes

The weak inflation and growth backdrop supports further monetary policy easing. We keep our call for a further 10 bps cut to the 1Y LPR and 20 bps cut to the 5Y LPR in 4Q23 to bring the rates to 3.35% and 4.00% respectively by yearend.

For now, we still expect interest rates to stay on hold in 2024 on the assumption of further economic stabilisation while PBOC wants to avoid encouraging a further build-up in leverage.