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10 Dec 2014
China CPI warrants more aggressive monetary policy - ANZ
FXStreet (Bali) - Li-Gang Liu Chief Economist, Greater China, and Hao Zhou, China Economist, both working at ANZ, note that China CPI inflation in Nov warrants more aggressive monetary policy responses by the PBoC.
Key Quotes
"CPI inflation in November suggests that domestic demand remains lukewarm, thus warrants more aggressive monetary policy responses. Rising deposit and market rates after the policy rate cut last month suggest that only reserve requirement ratio (RRR) cuts will be effective in lowering firms’ funding costs and stabilising market volatility."
"We cannot exclude the possibility of a RRR cut before the end of this year. If the PBoC were to set a M2 growth target at around 12-13% next year, we estimate at least three 50bps RRR cuts will be possible over the course of 2015."
Key Quotes
"CPI inflation in November suggests that domestic demand remains lukewarm, thus warrants more aggressive monetary policy responses. Rising deposit and market rates after the policy rate cut last month suggest that only reserve requirement ratio (RRR) cuts will be effective in lowering firms’ funding costs and stabilising market volatility."
"We cannot exclude the possibility of a RRR cut before the end of this year. If the PBoC were to set a M2 growth target at around 12-13% next year, we estimate at least three 50bps RRR cuts will be possible over the course of 2015."