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2 Mar 2015
China's rate cut suggest growth slowed in February - Nomura
FXStreet (Bali) - According to Nomura's Economists, China's benchmark rate cut over the weekend, together with more proactive fiscal measures last Wednesday, suggests that momentum may have slowed significantly in February.
Key Quotes
"The benchmark rate cut, together with more proactive fiscal measures rolled out on Wednesday by the State Council, suggests to us that growth momentum may have slowed significantly in February, heightening the authorities’ concerns."
"We believe the authorities should already have some high-frequency data – such as the official PMI, trade and electricity production – to help them in their assessment."
"Implications for future monetary policy This rate cut signals policymakers’ willingness to take further action to ease financing conditions in an effort to maintain stable growth."
"It also suggests that growth may have slowed sharper than we expected. We now forecast one more benchmark rate cut (25bp in Q2), in addition to our existing forecast of a 50bp RRR cut in each of the remaining quarters of the year."
"More policy easing should help mitigate slowing growth momentum but is unlikely to be sufficient in turning around the growth downtrend, which is being driven by deeply rooted structural problems."
"We maintain our view that GDP growth will slow to 7.1% y-o-y in Q1, down from 7.3% in Q4 2015, and to 6.8% for the full year."
Key Quotes
"The benchmark rate cut, together with more proactive fiscal measures rolled out on Wednesday by the State Council, suggests to us that growth momentum may have slowed significantly in February, heightening the authorities’ concerns."
"We believe the authorities should already have some high-frequency data – such as the official PMI, trade and electricity production – to help them in their assessment."
"Implications for future monetary policy This rate cut signals policymakers’ willingness to take further action to ease financing conditions in an effort to maintain stable growth."
"It also suggests that growth may have slowed sharper than we expected. We now forecast one more benchmark rate cut (25bp in Q2), in addition to our existing forecast of a 50bp RRR cut in each of the remaining quarters of the year."
"More policy easing should help mitigate slowing growth momentum but is unlikely to be sufficient in turning around the growth downtrend, which is being driven by deeply rooted structural problems."
"We maintain our view that GDP growth will slow to 7.1% y-o-y in Q1, down from 7.3% in Q4 2015, and to 6.8% for the full year."