In recent months, rising nominal rates and falling inflation (0.8% yoy in January), have caused real rates to increase, whereas growth continued to slow and liquidity tightened as a result of PBOC intervention to prevent…
In recent months, rising nominal rates and falling inflation (0.8% yoy in January), have caused real rates to increase, whereas growth continued to slow and liquidity tightened as a result of PBOC intervention to prevent capital outflows.
As a result, the PBoC cut banks required reserve ratio (RRR) and policy rates in February.
Societe Generale notes as follows on Monday:
The net effect remains limited and we expect the central bank will need to provide further selective easing in the future with liquidity injections, including RRR cuts.
There could also be easing measures in the housing market to stave off a sharper property crash. However, we don't expect China will join the currency war, with only modest yuan depreciation expected vs the USD
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