SHANGHAI (Reuters). – Analysts say that the small reduction to the reserve money required by Chinese banks may indicate concern about U.S. monetary tightening and inflation, which could make further interest rate cuts more unlikely.

People’s Bank of China announced Friday a 25 basis-point (bp), cut in the banks’ reserve requirements ratio (RRR), effective April 25, and releasing around 530 billion yuan ($83.16 trillion) of liquidity long-term. The bank said that the change would support firms and industries affected by rising COVID-19 cases.

Although the reduction was expected by many, it was less than 50 or 100bps. It came after Friday’s central bank kept its medium-term lending rate unaffected and rolled over mature loans.

Goldman Sachs’ (NYSE:) analysts identified “the key considerations that underlie this more conservative decision.”

They wrote that the PBOC was concerned about potential spillovers from countries raising interest rates. Others have also suggested that one of these spillovers is the drawback of capital to China. A Chinese rate cut could exacerbate this problem.

Analysts at Goldman Sachs also stated that the PBOC was concerned about the impact of lowering interest rates on an economy with weak credit demand and uncertain inflation outlook.

Analysts did not expect a reduction in central bank policy rates or an increase in RRR, as such worries were likely to continue. The analysts said Wednesday’s cut in the central bank’s loan prime rate, which is the benchmark for corporate or household lending, was not likely.

They suggested that policymakers may be more likely to stimulate growth through more fiscal measures, targeted easing via relending or rediscounting and more taxation.

Citi analysts said that a modest 5bps reduction in the 1-year prime rate for loans on April 20 was possible. However, policymakers will prioritize credit expansion above interest rate cuts.

According to two people with direct knowledge, a high-ranking Chinese regulator encourages banks to lower their deposit rate ceilings.

($1 = 6.3731 )