China may cut benchmark interest rate before Lunar New Year as ‘existing measures are not sufficient’
- The People’s Bank of China, China’s central bank, has not shifted the more powerful one-year lending rate since 2015
- Barclays Plc economists, led by Jian Chang, say ‘existing measures are not sufficient’
The rapid deterioration in China’s economic data could spur the central bank to cut its benchmark interest rate as soon as Friday, according to Barclays Plc economists.
“Existing measures are not sufficient to lower the financing costs of the real economy, in a down-cycle with rising credit risk and falling producer-price inflation,” the analysts led by Jian Chang wrote.
“Hence, lowering the risk-free rate is unavoidable, in our view.”
Chang was the only economist in Bloomberg surveys to correctly predict rate cuts that policymakers enacted in late 2014.
China’s central bank is not in a hurry to cut the one-year lending and deposit rates, according to Citibank economists.
However, in a note from Wednesday, they said they expect a cut in the Standing Lending Facility rate, which is the Chinese equivalent of the Fed’s Discount Window, from as early as February.