The cuts were expected. The People’s Bank of China cut its 7 day reverse repo benchmark rate by 10bp to 1.4% earlier this month. Governor Pan Gongsheng said that 10 basis point cut would lead to a reduction in the benchmark loan prime rate (LPR) of the same size.
Delivered today.
LPRs are no longer as important as they once were. The People’s Bank of China (PBOC) shifted its primary monetary policy tool to the seven-day reverse repurchase agreement (reverse repo) rate. This transition began in mid-2024. This move aligns China’s monetary policy framework more closely with global standards, such as those of the U.S. Federal Reserve and the European Central Bank, which typically rely on a single short-term policy rate to guide market expectations and liquidity.
This article was written by Eamonn Sheridan at www.forexlive.com.
