China’s central bank is likely to cut interest rates in 2025 as part of a broader policy shift, according to the Financial Times. The People’s Bank of China (PBOC) has stated its intention to prioritize interest rate adjustments and move away from “quantitative objectives” for loan growth.
The PBOC’s comments align with policymakers’ commitment to creating a more market-driven interest rate curve. Analysts expect further changes this year to ensure credit demand is more responsive to monetary policy moves.
China’s 10-year and 30-year treasury yields have hit record lows, indicating expectations of fresh monetary easing. The economy’s main rate, the seven-day reverse repo rate, was last cut from 1.7% to 1.5% in September.
As part of a broader plan to overhaul its policy framework, China is transitioning away from state-directed bank lending and towards a more market-driven approach. Analysts say this requires deep structural changes in the economy alongside interest rate reform.
China’s governing Politburo recently eased monetary policy stance for the first time in 14 years, vowing to cut interest rates “in a timely manner” and reduce bank reserve requirements. The policy announcements come as China prepares for more trade tensions with the US.
Source: https://www.reuters.com/markets/asia/chinas-central-bank-might-cut-interest-rates-current-level-15-2025-ft-reports-2025-01-03