Galaxy Securities pointed out that the moderate easing bias remains unchanged, but the pace of interest rate cuts may change, and another rate cut may need to wait. The orientation of monetary policy towards moderate easing in 2025 remains the basic narrative, with room for interest rate cuts and reserve requirement ratio cuts throughout the year, with a possible cumulative adjustment of interest rates (7-day reverse repo rate) by 30-40BP and guiding the 5-year LPR to decrease by 40-60BP. The reserve requirement ratio may be cumulatively reduced by 100-150BP throughout the year. The central bank's open market operations may have a net purchase of government bonds of over 2 trillion yuan throughout the year. The window for interest rate cuts may gradually open after the market expects the Fed to cut interest rates in the second quarter. Reserve requirement ratio cuts and repurchase agreements will be important tools to release mid-to-long-term liquidity, while reserve requirement ratio cuts can save banks' costs, support credit expansion, and the probability of landing in the first quarter still remains high. We predict that in 2025, the fluctuation range of the annual yield of the 10-year government bonds will be between 1.5% to 1.9%. If the central bank cuts interest rates by 40BP throughout the year, according to our calculations, 1.64% may be a more reasonable level. The exchange rate of the US dollar to the Renminbi may fluctuate around 7.3.
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Galaxy Securities pointed out that the moderate easing bias remains unchanged, but the pace of interest rate cuts may change, and another rate cut may need to wait. The orientation of monetary policy towards moderate easing in 2025 remains the basic narrative, with room for interest rate cuts and reserve requirement ratio cuts throughout the year, with a possible cumulative adjustment of interest rates (7-day reverse repo rate) by 30-40BP and guiding the 5-year LPR to decrease by 40-60BP. The reserve requirement ratio may be cumulatively reduced by 100-150BP throughout the year. The central bank's open market operations may have a net purchase of government bonds of over 2 trillion yuan throughout the year. The window for interest rate cuts may gradually open after the market expects the Fed to cut interest rates in the second quarter. Reserve requirement ratio cuts and repurchase agreements will be important tools to release mid-to-long-term liquidity, while reserve requirement ratio cuts can save banks' costs, support credit expansion, and the probability of landing in the first quarter still remains high. We predict that in 2025, the fluctuation range of the annual yield of the 10-year government bonds will be between 1.5% to 1.9%. If the central bank cuts interest rates by 40BP throughout the year, according to our calculations, 1.64% may be a more reasonable level. The exchange rate of the US dollar to the Renminbi may fluctuate around 7.3.