For background to this:

The People's Bank of China cuts rates on MLF and RR

China financial media - analysts expect prime rate cut Thursday

Nomura say they now expect the LPR to be cut again this week (the People's Bank of China lowered the one-year Loan Prime Rate by 5 basis points to 3.80% from 3.85% back at the December setting) and that both the 1 and 5 year LPRs could be cut.

Nomura only expect a small cut (like in December of only 5bps to the 1 year), saying "there is limited space for additional LPR cut":

  • Banks' benchmark deposit rates have been at historically low levels, with the one-year deposit rate at 1.5% since late 2015 following several rounds of cuts as the PBoC decided against hiking deposit rates during the economic recovery in 2016-17.
  • Further LPR cuts, especially to the five-year LPR. would squeeze commercial bank net interest margins, exerting pressure on bank profitability. which is set to be hit by the ongoing growth slowdown in general and the contraction of the property sector in particular.