CNY: 14-day rate cut to have no effect on the currency – Commerzbank
Monday morning, the PBoC cut one of its interest rates, the 14-day repo rate, Commerzbank’s FX analyst Volkmar Bauer notes.
The impact of the cut is likely to be negligible
“If you are wondering where a 14-day rate comes from, in addition to the 7-day repo rate, the 1-Year Medium Term Lending Facility and the two loan prime rates, you are probably not alone. And it describes quite well the problem that the PBoC has and perhaps likes to cultivate from time to time.”
“Despite all the reassurances, monetary policy in China remains very opaque. Just a few weeks ago, it was announced that the PBoC would focus more on the 7-day repo rate and no longer use the 1-year tender rate to steer interest rates in China.”
“This raises the question of why a cut in the 14-day repo rate is being sold today as monetary easing, even though this refinancing tool is rarely used and this move only mirrors the cut in the 7-day rate in June. In real economic terms, the impact is hence likely to be negligible, which is why this rate cut is unlikely to have any real impact on the currency.”
Author
FXStreet Insights Team
FXStreet
The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.
