China slashed its benchmark rate for mortgages

Analysis via National Australia Bank:

  • The size of the cut is impressive. It was larger than expected, and encouragingly it does show authorities are now really putting their words into actions.
  • The PBoC in particular has stated its commitment to reinvigorating the economy, given those concerns around deflationary forces and a consumer that remains very subdued.
  • The question of course is whether a lower rate really going to make a difference, considering rates were already at record low levels. It remains to be seem, but certainly it's encouraging to see that there's a serious commitment to supporting the economy, and particularly to invigorating the consumer.

Analysis via ANZ:

  • Today's rate cut suggests that senior policymakers still believe that economic headwinds are mainly focused on some individual sectors.
  • Although the cut to the 5-year LPR is decent, it seems it's a bit late. It will still take some time to observe the stimulating effect on real estate market. Recent declines in housing prices have transmitted pressure to the overall economy, and by simply saving the real estate industry is not enough to solve the problem of insufficient domestic demand.
  • We maintain our expectations of two policy rate cuts this year.
PBOC cut