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11 May 2015
PBOC cut consistent with expectations - Nomura
FXStreet (Bali) - According to Nomura Economists, the PBoC cut over the weekend is consistent with the bank's expectations.
Key Quotes
"The People’s Bank of China (PBoC) has cut both the one-year benchmark lending rate and the one-year benchmark deposit rate by 25bp, to 5.1% and 2.25%, respectively, effective 11 May 2015."
"It also raised the ceiling of the deposit rate from 1.3x to 1.5x, essentially making the rate cut asymmetric. We view this as a step to advance interest rate liberalisation, and bank margins could be hurt."
"This cut is consistent with our expectations – our proprietary monetary policy signal index indicated that the probability of policy easing was as high as 0.62 in May and we believed this time it would take the form of rates cut (see China: No quick rebound in sight, 28 April 2015)."
"The economy’s sequential stabilisation, as suggested by the unchanged official PMI (50.1) in April from March, appears to still be fragile and requires more support from further policy easing. On a year-on-year basis, we still expect growth to weaken further, with industrial production growth slowing to 5.4% y-o-y in April from 5.6%."
Key Quotes
"The People’s Bank of China (PBoC) has cut both the one-year benchmark lending rate and the one-year benchmark deposit rate by 25bp, to 5.1% and 2.25%, respectively, effective 11 May 2015."
"It also raised the ceiling of the deposit rate from 1.3x to 1.5x, essentially making the rate cut asymmetric. We view this as a step to advance interest rate liberalisation, and bank margins could be hurt."
"This cut is consistent with our expectations – our proprietary monetary policy signal index indicated that the probability of policy easing was as high as 0.62 in May and we believed this time it would take the form of rates cut (see China: No quick rebound in sight, 28 April 2015)."
"The economy’s sequential stabilisation, as suggested by the unchanged official PMI (50.1) in April from March, appears to still be fragile and requires more support from further policy easing. On a year-on-year basis, we still expect growth to weaken further, with industrial production growth slowing to 5.4% y-o-y in April from 5.6%."