Asia’s calendar on Tuesday also includes minutes of the Reserve Bank of Australia‘s last policy meeting, New Zealand trade data, Hong Kong inflation, and export and current account figures from Taiwan.
Although China’s economy may be crying out for more stimulus, the PBOC is expected to eschew a repeat of July’s surprise rate cuts and keep borrowing costs on hold.
In a Reuters survey of 37 market watchers, all respondents expected both the one-year and five-year loan prime rates to be left on hold at 3.35% and 3.85%, respectively.
China surprised markets by cutting major short- and long-term interest rates in July, its first such broad move in almost a year, signaling policymakers’ intent to strengthen economic growth.
But shrinking interest margins at lenders remain the key constraint discouraging commercial banks from further lowering the lending benchmarks, market watchers said, and policymakers are also wary that lower interest rates may weaken the yuan further and spur capital outflows.
China’s bond market continues to signal lower policy rates ahead. The 10-year yield closed on Monday at 2.16%, near the 2.10% low from Aug. 5, which is the lowest since comparable records began nearly a quarter of a century ago.
