Overview
- The 1-year LPR was held at 3.00% and the 5-year at 3.50% in the latest monthly fixing.
- Officials have tolerated a firmer yuan, with the daily midpoint set below 7 per dollar in late January and the offshore rate near 6.89 on Tuesday.
- China’s growth slowed to about 4.5% year on year in the fourth quarter, with weak retail spending and deflationary pressures persisting.
- The central bank recently cut rates on structural policy tools by 25 basis points and indicated there is room to lower banks’ reserve requirement ratios.
- Analysts see limited scope for near-term benchmark cuts given export competitiveness risks, pressures on bank margins, and a policy focus on the 7-day reverse repo rate near 1.4%.