Goldman Look For PBoC Easing In Coming Days

In the wake of the latest State Council meeting Goldman Sachs note that “Premier Li required policymakers to roll out measures to support consumption. He also hinted at a potential RRR cut and required financial institutions to further lower funding costs for the real economy. We expect the PBOC to deliver a 50bp RRR cut and potentially also an interest rate cut in the next few days.”

• “The discussion around monetary policy is in line with our expectation, although the RRR cut seems more certain in the coming days than the interest rate cut as the China-U.S. interest rate differential narrowed substantially in recent days. Despite policymakers' emphasis on consumption, we think Covid control policies amid the protracted pandemic, potential slowdown in overall GDP growth and as a result weak household income growth would continue to weigh on the consumption outlook.”