One symmetric PBoC rate cut likely in Q3

Stabilising growth and channelling low cost financing to the real economy remain the top priority for China's monetary policy in H2 2015. Despite the four interest rate cuts since November 2014 and +150bp RRR cuts, in July, the average nominal lending rate remains at close to 6%. 

Moreover, since the RMB exchange rate pricing reform on 11 August, capital outflows have accelerated, which has tightened domestic liquidity and added upward pressures to onshore interest rates. Note that the benchmark lending and deposit rates are now at 4.6% and 1.75%, respectively.

"One symmetric rate cut is expected in Q3 and 100bp RRR cuts in H2, so today's move is consistent with our forecasts. Meanwhile, the blanket reserve requirement ratio (RRR) of 50bp, together with the targeted RRR cuts to select institutions (effective 6 September), will release about CNY750bn in liquidity to the banking system", says Barclays.