Back
11 Dec 2014
China's subdued inflation leaves room for policy easing - Nomura
FXStreet (Bali) - According to Nomura's Asian Economics Team, China's subdued inflation increases the need for further policy easing, adding that their core view is for one more interest rate cut in Q2 and one 50bp reserve requirement ratio (RRR) cut in each quarter of 2015.
Key Quotes
"The subdued inflation, in line with the weaker-than-expected trade data released last Monday, suggests weak growth momentum in November. A batch of core activity data will be released this Friday, and we continue to expect the data to disappoint market expectations: We forecast industrial production growth slowing to 7.3% y-o-y from 7.7% in October, fixed asset investment slowing to 15.6% y-o-y (ytd) from 15.9% and retail sales declining to 11.3% from 11.5%. For now, we maintain our forecast of GDP growth of 7.3% y-o-y in Q4, but see some downside risks."
"Subdued inflation leaves more room for policy easing, and weak growth momentum increases the need for further policy easing. We continue to expect one more interest rate cut in Q2 and one 50bp reserve requirement ratio (RRR) cut in each quarter of 2015. That said, we do see a rising risk of a RRR cut being delivered before year-end given low inflation and weak growth momentum."
Key Quotes
"The subdued inflation, in line with the weaker-than-expected trade data released last Monday, suggests weak growth momentum in November. A batch of core activity data will be released this Friday, and we continue to expect the data to disappoint market expectations: We forecast industrial production growth slowing to 7.3% y-o-y from 7.7% in October, fixed asset investment slowing to 15.6% y-o-y (ytd) from 15.9% and retail sales declining to 11.3% from 11.5%. For now, we maintain our forecast of GDP growth of 7.3% y-o-y in Q4, but see some downside risks."
"Subdued inflation leaves more room for policy easing, and weak growth momentum increases the need for further policy easing. We continue to expect one more interest rate cut in Q2 and one 50bp reserve requirement ratio (RRR) cut in each quarter of 2015. That said, we do see a rising risk of a RRR cut being delivered before year-end given low inflation and weak growth momentum."