PBoC may hike again in June and pause afterwards – Standard Chartered

In view of analysts at Standard Chartered, moderating growth and inflation suggest that the PBoC is unlikely to be inclined towards further material monetary policy tightening.

Key Quotes

“We still expect it to follow the US Fed’s pace near-term and hike key money market rates by another 10bps after a likely US rate hike in June, in order to maintain FX market stability. After this, the central bank pause on account of likely slower economic and credit growth ahead.”  

“China posted better-than-expected Q1 economic growth, with real GDP rising by 6.9% and nominal GDP by 11.8% y/y. Growth may have peaked in the near term, however. We expect GDP growth to moderate to 6.6% in Q2 as tighter monetary policy and recent regulatory tightening are expected to lower credit growth and infrastructure investment. Nominal GDP growth, however, may stay above 10% in Q2 despite slower real GDP growth and a likely lower GDP deflator.”

“April data was weaker than expected: IP growth slowed to 6.5% from 7.6% in March, albeit still higher than the 2016 average of 6%; fixed asset investment (FAI) eased to 8.9% (9.2% prior); and retail sales softened to 10.7% (10.9% prior).”