Nick Kounis, head of financial markets research, suggests that they are expecting the PBOC to cut its main policy rate for the first time since economic growth weakened.
Key Quotes
“We expect a 25bp cut this year and another next year, taking the 1y lending rate to 3.85%. Previously we expected no change given the targeted easing strategy.”
“We also expect further reductions in the RRR, with the rate for large banks to be cut by 150bp this year (previously 100bp) and another 100bp in 2020 (previously 50bp), to take it to 11% by the end of that year.”
“Over and above these steps, the Chinese authorities will also continue adding targeted fiscal and monetary support, with a specific focus on private firms and firms hit most by the US import tariffs.”
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