China's current round of inflation is likely to be peaking, and the consumer price index (CPI) will not hit a new high in August. In this regard, some financial institutions expect that they will not raise interest rates again during the year.
Mizuho Securities and Industrial Bank’s forecast for China’s CPI growth in August fell below 6.5% in July, 6.2% and 6.1% respectively. Under the premise that food prices are still to be confirmed in the coming week, ANZ’s The forecast range is 6.2%-6.5%.
Although inflation expectations are still high, Liu Ligang, director of economic research at ANZ Greater China, said that China’s central bank’s issuance rate has remained stable this week after rising by 8 basis points last week, which largely dispelled the market’s Interest rate hike expectations. He predicted that in the short term, the central bank will maintain a “waiting†strategy, and the possibility of adjusting interest rates and deposit reserve ratios is not high.
Lu Zhengwei, chief economist of Industrial Bank, estimated that the median growth rate of CPI in August was 6.1%, down 0.4 percentage points from the previous month. "Unless there is a small probability event that makes the CPI in September hit the highest in history, the peak year-on-year CPI may have become history in July." To this end, he expects the central bank to not raise interest rates during the year.
In a research report released on August 26, the political commissar of Lu said that the year-on-year growth rate of exports in August may unexpectedly rebound to about 30%. Although the foreign trade surplus dropped from last month, it is still expected to be at a high level of around US$29 billion. In the strong rebound of exports, the total retail sales of fixed assets and social consumer goods representing domestic demand may both decelerate by about 0.2 percentage points.
He suggested that the rebound in exports will somewhat ease the concerns of the market's external demand. However, the situation that the domestic demand is decelerating and the CPI is lower than the historical normal value, M2 fell below 14%, which is expected to tighten the market. Expectations are weakening, and the expectation that the macro-control policy “directed easing†or loose-tuning will quickly heat up.
However, the report believes that the central bank’s monetary policy will maintain “three noes†during the year: no interest rate increase, no approval, no relaxation. In the case of CPI year-on-year turning point, it should not continue to raise interest rates during the year; considering the overall tight liquidity in the second half of the year, the use of the statutory deposit reserve ratio is expected to stop, but to ensure the stable M2 at the end of the season, it is expected Window guidance may be used more. Although the "two rates" are no longer raised, the overall policy orientation will not be relaxed.
The Industrial Bank also expects that, at the end of the quarter, financial institutions will increase their willingness to over-prepare, banks to focus on deposits, and window guidance in the open market operations, which may be repeated from mid-September to early October. There is a more serious "liquidity 痉挛".
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