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Economists at Standard Chartered Bank have revised their CPI inflation forecast higher though they expect inflation to fall through the rest of 2020 opening the door for further monetary easing. USD/CNY trades at 6.956.

Key quotes

“We revise our CPI inflation forecast for 2020 to 2.9% from 2.6%, which remains below the market consensus of 3.2%.”

“We maintain our expectation that monthly CPI will retreat rapidly from Q2. We expect CPI inflation to average 5% y/y in Q1, 3.5% y/y in Q2, 2.1% y/y in Q3 and 0.9% y/y in Q4.” 

“With inflation on a downtrend, China can further ease policy to revive business activity without inflation being a constraint. We expect the People’s Bank of China (PBoC) to rotate between cuts to the reserve requirement ratio (RRR) and medium term lending facility (MLF) rate near-term.”


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