Zhaopeng Xing, analyst at ANZ, suggests that the latest inflation data from China should be evaluated on a MoM basis, or by focusing on the core inflation index due to the distortionary effect of volatile food prices.
Key Quotes
“CPI slowed to 0.4% m/m in November from 0.9% in October. Meanwhile, both core CPI and PPI m/m fell by 0.1%, respectively as well, hinting at deflationary risks going forward.”
“Considering slowing inflation ahead, we expect the PBoC to cut the RRR by 50bps to cater to higher liquidity demand due to increased cash withdrawals during the Spring Festival period in late January next year and the issuance of special local government bonds (SLGBs) in Q1 2020.”
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