“Unlike the U.S. and EU, China remains the outlier on monetary policy, with still benign inflation and recovering but still weak activity creating room for the PBOC to remain accommodative in the first half.”
Market participants also said the LPR decision was within expectations, as the People’s Bank of China ramped up medium-term liquidity injections, rolling over maturing policy loans last week while keeping the interest rate unchanged. “We think the PBOC may cut the MLF rate and banks will subsequently reduce the LPRs as early as March following the annual session of the National People’s Congress which is scheduled to begin on March 5,” said Tommy Wu, senior economist at Commerzbank.“Macro policy stimulus will likely be announced during the annual session, and it will be a good timing for the PBOC to cut rates and signal that it stands ready to support the economic recovery.