Yesterday the People's Bank of China held rates steady as per market consensus:
Goldman Sachs acknowledged after the decision that looking ahead “substantial monetary or credit stimulus” from the Bank is unlikely, citing factors such as:
- PBOC is still focused on curbing financial risks
Goldman Sachs say the Bank's worries encompass rising government debt, widening regional economic imbalances and heightened US-China tensions. GS is expecting a reserve ratio cut in June, by 25bp. GS nominate that month for the cut saying the move is needed to “boost market sentiment and support credit growth”. GS note that liquidity demand usually picks up at the end of the quarter.
The PBOC last cut the RRR, or the amount of cash banks must keep in reserves, in March, lowering it by 25 basis points.