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PBOC left rates unchanged, but Goldman Sachs expects Bank move in June

Yesterday, the People’s Bank of China kept rates steady in line with market consensus:

Goldman Sachs acknowledged after the decision that “substantial monetary or credit stimulus” from the Bank is unlikely to be contemplated, citing factors including:

  • PBOC still focuses on reducing financial risk

Goldman Sachs says the bank’s concerns relate to rising public debt, worsening regional economic imbalances and escalating US-China tensions. GS expects the reserve ratio to fall by 25 basis points in June. GS names that month for the cut, saying the move is necessary to “boost market sentiment and support credit growth.” GS notes that demand for liquidity generally picks up at the end of the quarter.

The PBOC last reduced the RRR, or the amount of cash banks must hold in reserve, in March, lowering it by 25 basis points.


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