Standard Chartered: Further Monetary Policy Easing Remains On The Cards

Standard Chartered note that Friday’s RRR cut “was widely expected as the State Council meeting on 23 November called for the use of RRR cuts to increase financial support for the real economy. It reaffirms China’s pro-growth policy stance amid continued economic headwinds. Compared to relending and open market operations (OMOs), an RRR cut provides cheaper and permanent liquidity to banks to increase support for the real economy.”

• “While maintaining our call of another 10bps cut to the medium-term lending facility (MLF) rate in December, we note that Friday’s RRR cut increases the risk of the MLF cut being delayed to early 2023 (to avoid causing excessive easing expectations in the market). Our argument for further monetary policy easing is underpinned by the continued decline in China’s housing market, fresh bouts of COVID resurgence and contracting export growth.”