Nomura Sees Only Limited PBoC Rate Cuts

With speculation rising in recent weeks around the China interest rate outlook, Nomura weighs in, stating they only see limited rates cuts, if they are delivered at all.
"Will the PBoC cut policy rates, especially lending rates? We think the chances are low, though recently the probability has risen somewhat. Even if the PBoC cuts its main policy rates, including the 7-day OMO and 1y MLF, we believe it would be no more than 10bp. We assign an extremely low likelihood to the PBoC cutting its benchmark deposit rate, and instead expect it to increasingly use its newly introduced window guidance to pressure banks to lower deposit rates. Despite all the fanfare about rate cuts, we do not view funding costs as a major barrier to a growth recovery. Beijing will likely focus on boosting the confidence of households, the private sector and multinationals to help sustain post-pandemic recovery momentum."