J.P.Morgan Maintains General Easing View, Credit Data Intensifies Near-Term Worries

J.P.Morgan note that “today’s credit data collapse, along with other latest developments (Country Garden event and July CPI deflation), further intensified worries about near-term headwinds.”

• “While our baseline forecast considers a bazooka-like stimulus as a low-probability event, we do expect further pro-growth measures will be rolled out. In the housing market, we expect easing measures will be announced on the demand & supply sides in August-September.”
• “On the monetary policy front, we maintain our forecast of a 25bp RRR cut in the current quarter and a 10bp policy rate cut in 4Q.”
• “The 25bp RRR cut can be justified by today’s disappointing credit report, and also to support other policy measures.”
• “The 25bp RRR cut that we forecast could also provide liquidity to the banking system to support the pace of government bond issuance in the coming months.”