China's CEWC Reinforces Expectations for Further Monetary Easing — Market Talk
2024-12-13
Category: economic

The monetary policy message from China's CEWC backs the view that the central bank will further cut the policy rate, Barclays economists say. The meeting minutes explicitly called for reductions in banks' reserve requirements and interest rates, they add, noting the dovish language that echoes this week's Politburo meeting. Assuming a gradual pickup in CPI, Barclays expects rate cuts to proceed at a pace of 10 bps a quarter: once before year-end, followed by cuts in 1Q and 2Q 2025. However, if inflation continues to fall below expectations, the PBOC could act more aggressively, cutting rates by about 20 bps a quarter, they add. Barclays maintains its forecast for RRR cuts of 200 bps to 300 bps to support government bond issuance, with the next 50bp cut before the Lunar New Year. (fabiana.negrinochoa@wsj.com)