J.P.Morgan: The PBOC Is Easing Earlier Than Expected

J.P.Morgan write “following today’s announcement re: A RRR cut, we remove our 2Q RRR cut forecast, but retain the 25bp RRR cut forecast for 4Q. This is not necessarily a high conviction call as the PBOC could expand medium-term liquidity injection though MLF operation.”

• “On the policy rate front, we maintain our forecast for two rate cuts this year, 10bp each in 1Q and 3Q. Instead of more aggressive rate cuts anticipated by the market, we hold the view that the PBOC will continue to face multiple trade-offs in its policy rate decisions. At the press conference, Governor Pan mentioned to maintain a reasonable real interest rate level in a forward-looking manner, to match the demand of supporting potential economic growth.”
• “We think the most macro and growth relevant indicator is TSF growth. Governor Pan reiterated that TSF and money supply growth should be in line with economic growth and inflation targets. We maintain our forecast for stable TSF growth at 9.5% this year, leaving credit impulse averaging at 5.0%pts (flat as 2023).”
• “Governor Pan also mentioned the PBOC and NAFR will roll out measures to support developers’ property management operational loans. Details will follow in a separate official document later today or tomorrow.”