(Bloomberg) — China announced plans for a rare economic briefing by three top financial regulators just as it cut one of its short-term policy rates, fueling speculation that authorities are preparing to step up efforts to revive growth.
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Authorities announced on Monday that central bank governor Pan Gongsheng will hold a press conference on financial support for economic development tomorrow, along with two other officials. Minutes later, the People’s Bank of China cut the 14-day reverse repurchase rate, part of reductions that began in July.
Taken together, these measures reinforce expectations that the People’s Bank of China will lower rates, after the US Federal Reserve finally began cutting rates last week. China’s central bank also recently signaled it was preparing additional policies. A string of disappointing data in August raised concerns that China could miss its annual growth target of around 5% without further support.
China’s 10-year government bond yield fell one basis point to a fresh low of 2.03%, a sign that traders are pricing in more monetary stimulus. In the currency market, the People’s Bank of China raised its daily reference rate for the yuan to 7.0531 per dollar, putting the key 7 level in sight.
While Monday’s reduction reflected a catch-up with July’s 10-basis-point cut in the seven-day rate, further easing is likely imminently, said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
“I expect the People’s Bank of China to cut the seven-day repo rate and the reserve requirement ratio in the coming months,” he added. “There will be a press conference tomorrow where financial regulators will announce their policy stance.”
China has another chance to cut its one-year borrowing costs on Wednesday. In July, the People’s Bank of China cut the reverse repo rate to seven days before cutting the medium-term lending facility to its highest level since April 2020.
The decision to cut the 14-day rate to 1.85% from 1.95% was made ahead of the National Day holiday, which will last for seven days from Oct. 1. The People’s Bank of China typically offers 14-day loans before an extended break. It last provided such loans in February, ahead of the week-long Lunar New Year break.
The central bank also injected 74.5 billion yuan ($10.6 billion) of liquidity into the banking system through the tool, it said in a statement.
“A 10 basis point cut alone is not enough to stop the decline in economic momentum,” said ANZ chief mainland economist Raymond Yeung. “A larger package is needed. Other monetary policy measures are likely to be announced, such as the RRR cut, MLF cut and mortgage rate cut.”
–With assistance from Wenjin Lv, Iris Ouyang and Josh Xiao.
(Updates with details, analyst comment.)
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