China’s central bank is expected to keep rates on its medium-term policy loans unchanged on Tuesday, a Reuters survey showed, despite fresh signs the economic recovery is losing momentum.
The People’s Bank of China lastto 2.65 percent in June. Retail sales, industrial output and investment data due on Tuesday will provide more clues on the direction of borrowing costs.
The yuan has lost about 5 percent to the dollar so far this year to become one of the worst performing Asian currencies. China remains an outlier among global central banks as it has loosened monetary policy to shore up a stalling recovery but further rate cuts will widen the yield gap with the United States, putting more pressure on the yuan and risking outflows.
“We believe more pro-growth policies are warranted to support the economic growth, and further easing in monetary policy can be expected,” analysts at BofA Global Research said.at a reasonable and balanced level’ during July’s Politburo meeting, we see limited space for significant monetary easing in the near term.” in total in the third quarter of the year. A reserve requirement ratio cut was also a possibility to help restore credit demand.
In derivatives market, one-year interest rate swaps, a gauge that measures investor expectations of funding costs in the future, fell to 1.9 percent on Monday, the lowest since October 2022, suggesting some market participants are pricing in further rate reductions.Subscribe to our daily newsletter
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