That’s doesn’t sound like no more cuts to me. It sounds like data dependent cuts, a la the FOMC. Having said that, Q4 data is not until January and the PBOC appears to be responding to press speculation, not getting ahead of it, so I’m probably over-reading the situation. It’s worth watching given any PBOC “put” would put more pressure on the Aussie and support iron or at the margin.
Meanwhile, Goldman reckons no, from Forexlive:
In the wake of Friday’s People’s Bank of China (PBOC) rate cut, Goldman Sachs think the central bank is more likely to use further liquidity injections instead of additional rate cuts.
In summary from GS (HK research):
- PBOC wants to maintain growth at “lowest possible cost” in terms of risk of excess liquidity
- PBOC’s rate cut having limited impact on growth
- Expects PBOC to push down interbank interest rates through more “nimble” market injections (eg, , such as medium-term lending facility (MLF) as the primary policy option … medium-term is around 3 months or so)
Other measures expected:
- Expansion in loan quotas
- Easing in regulations
GS don’t see further interest-rate cuts in near term; says household disposable income would be compromised, and there would be risk of greater pressure on deposit outflows.