FXStreet (Bali) – According to Nomura, more fiscal stimulus by Chinese authorities is expected after PBoC’s rate and RRR cuts.
Key Quotes
“The People’s Bank of China (PBoC) has cut its benchmark rate by 25bp and lowered the reserve requirement ratio (RRR) for banks by 50bp, effective 26 August 2015.”
“After this rate cut, the benchmark 1-year lending rate will be 4.6% and the 1-year deposit rate will be 1.75%. It has also implemented an additional 50bp RRR cut for rural commercial/cooperative banks, rural credit cooperatives, and village and township banks and an additional 300bp RRR cut for financial leasing and auto financing companies.”
“This move also carries forward interest rate liberalisation by lifting the 1.5x ceiling for time deposits with tenors over one year.”
“The timing of RRR cut is in line with our forecast while the interest rate cut is earlier than we expected, but as we have highlighted yesterday, policy easing could be stepped up more amid the current equity market turmoil and recent capital outflows following the CNY fixing mechanism reform.”
“The move reflects that the government is willing to undertake accommodative policy to cope with weak growth momentum and contain possible macro risks associated with equity selloffs.”
(Market News Provided by FXstreet)