Researchers at UOB Group assessed the recent move by the PBoC.
Key Quotes
“PBoC announced a 100bps reduction in reserve requirement ratio (RRR) effective 15 Oct, partially to make repayment of maturing medium-term lending facility (MLF) while releasing a net RMB750 billion into the banking system”.
“It seems that PBoC has shifted its priorities, towards a more assertive posture in offsetting the effect of external pressures and domestic slowdown. However it noted that its prudent and neutral monetary policy stance remains, and there is no easing of policy. Given both the external and domestic conditions, there is likely to be another RRR cut by end of 2018 or early 2019″.
“With a strong US dollar as our base scenario, coupled with a dovish PBoC stance, we reiterate our USD/CNY forecasts, at 6.95 by end-2018, 7.00 by end-1Q19 and 7.10 by end-2Q19 and 3Q19″.
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