MNI China Daily Summary: Wednesday, Aug 28

MNI DATA TABLE: MNI China Interbank Liquidity Index (Aug) - 3

MNI DATA TABLE: MNI China Interbank Liquidity Index (Aug) - 2

MNI: PBOC Net Injects CNY19.3 Bln via OMO Wednesday

MNI: PBOC Sets Yuan Parity Lower At 7.1216 Weds; +2.31% Y/Y

CHINA PBOC CONDUCTS CNY277.3 BILLION VIA 7-DAY REVERSE REPOS WEDS

EZ/UK Bond Supply Calendar: Slov Samurai Synd; IT, FI Thursday

US EIA: CRUDE OIL STOCKS EX SPR -0.85M TO 425.2M AUG 23 WK

US MBA: REFIS -0.1% SA; PURCH INDEX +1% SA THRU AUG 23 WK

UK: Week Ahead

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VIEW CHANGE: GS still expects first cut in Aug24, but cut each meeting to 3%

BOE
  • “We revise down our inflation projections and now expect core and headline inflation at 2.6%yoy (vs 2.8%yoy previously) and 2.4%yoy (vs 2.6%yoy previously) by end-2024.”
  • “We remain comfortable with the view that the BoE will cut policy rates later than the ECB and expect the first 25bp cut with the MPR in August. But we now see a faster pace of cuts once policy normalisation starts, with 25bp moves per meeting (vs per quarter before) until Bank Rate falls back to 3% in mid-2025. This quicker pace is more in line with historical cutting cycles, our updated forecast for the ECB and our forecast for a quicker decline in inflation.”
  • Previously GS has expected 3.00% only by Q3-2026.
  • “We attach a 30% probability that Bank Rate will need to stay at 5.25% through 2024, if underlying inflation eases more gradually than we project. On the other hand, we place a 20% chance on the possibility that a much weaker economy pushes the MPC into earlier and faster cuts, with the first 25bp cut in May, followed by 50bp per meeting cuts through 2024H2.”
  • Regarding this week's meeting: “We look for a 7-2 vote split with Mann and Haskel dissenting for a further hike.”
  • “We expect the guidance to remain largely unchanged, with the minutes likely to re-emphasise the need for rates to remain restrictive for an extended period based on the MPC’s current forecasts.”
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