Via Forexlive:
A report from MNI is doing the rounds and the story along with soft Chinese weekend data is putting some pressure on the Australian dollar.
The People’s Bank of China is reluctant to ease the reserve requirement further because two targeted cuts earlier this year failed to achieve their stated goals of supporting agriculture and small business and may have instead benefitted real estate and other bloated parts of the economy, MNI understands.
The line “MNI understands” is a bit ambiguous but the news organization is well- connected in China.
They say the PBOC is likely to focus on small businesses and the rural sector if economic data remains soft. If problems begin to mount, a system-wide interest rate cut for the first time since 2012 or a cut in the reserve ratio is possible “but officials are still reluctant to take those steps.,” MNI reports.
I agree. This is not some cycle of bust and recovery, it is a structural adjustment to lower and less construction-focused growth supported by fiscal spending. If the RRR cuts come it will be a sign of panic.
