Tuesday, February 14, 2017

PBoC Likely to Stay Prudent On Rising CPI

Economic Research
         14 February 2017

Economic Update

China’s January CPI was lifted by the early Lunar New Year, and PPI continued to be supported by a low base effect as well as high commodity prices. Looking ahead, we expect to see a mild increase in CPI mainly due to gains in the non-food sectors, while PPI growth is likely to peak in 1Q17 but with more downside pressure thereafter, amid slowing economic growth. Policy wise, we believe the central bank has already switched to a tightening bias to curb asset bubbles, control financial risks and lower leveraging for financial institutions. Although benchmark rates would remain unchanged in 2017, there would be further increases in market based rates, in our view.

Economist:  Zhang Fan| +8621 6288 9611 ext 105

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