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The People’s Bank of China (PBoC) is expected to maintain an easing bias, given its concerns about financial stability, according to the latest report from ANZ Research.
China’s headline inflation will move higher amid the surge in global oil prices and recent geopolitical tensions. However, a limited impact is expected as the Chinese authorities has price control mechanisms in place in the energy and related sectors.
ANZ’s model shows that if oil prices increase 10 percent in 2020 from their average level in 2019, it will add 0.3ppt and 0.7ppt to ANZ’s baseline CPI forecast (to 3.8 percent, from 3.5 percent) and PPI forecast (to 0.3 percent, from -0.4 percent).
"We thus maintain our forecast for another 50bp reduction in the reserve requirement ratio (RRR) in 2020 after the cut announced on January 1," the report further commented.
