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3 Mar 2015
Further easing by PBoC quite likely – Danske Bank
FXStreet (Edinburgh) - Analysts at Danske Bank have not ruled out further monetary easing by the PBoC in the near/medium term.
Key Quotes
“With the PBoC currently having a clear easing bias in monetary policy there is also increasing speculation in the market that the PBoC will target a weaker CNY to support growth and ease deflationary pressure”.
“We expect the PBoC to continue to ease monetary policy in the coming months mainly by cutting the reserve requirement ratio by at least 100bp. Interest rates cuts in our view are ineffective if not supported by an injection of liquidity and a decline in interbank interest rates”.
“Monetary easing in China and some recovery in the manufacturing PMI should be positive for risk sentiment, particularly for other emerging markets. However, if China allows CNY to depreciate substantially it will probably be negative for emerging market currencies across the board”.
Key Quotes
“With the PBoC currently having a clear easing bias in monetary policy there is also increasing speculation in the market that the PBoC will target a weaker CNY to support growth and ease deflationary pressure”.
“We expect the PBoC to continue to ease monetary policy in the coming months mainly by cutting the reserve requirement ratio by at least 100bp. Interest rates cuts in our view are ineffective if not supported by an injection of liquidity and a decline in interbank interest rates”.
“Monetary easing in China and some recovery in the manufacturing PMI should be positive for risk sentiment, particularly for other emerging markets. However, if China allows CNY to depreciate substantially it will probably be negative for emerging market currencies across the board”.