VIEW: Nomura: More Monetary Easing Soon? Yes, But With Limited Impact

Nomura note that “according to its latest meeting memo, China’s State Council will step up efforts to “flexibly use a variety of monetary tools at an appropriate time to support the real economy” because “some of the domestic and external uncertainties are beyond expectations”.”

• •“Despite the impressive rebound in NBS activity data, we believe policymakers recognize that these data may be overstating the actual growth rebound and that headwinds remain; thus, they will likely further ramp up easing measures to stem what is actually a worsening growth slowdown, especially given surging Omicron cases, escalating lockdowns and a worsening property sector. While we assign a reasonably high likelihood to the PBoC cutting the one-year MLF rate and seven-day OMO reverse repo rate in April, the size of such a cut could be only around 10bp. Both the one-year and five-year LPR could be cut by 10bp on 20 April, and we expect the PBoC to cut the RRR by 50bp over the next couple of months. Beijing will also likely allow more local governments to ease their local property curbs.”