Nomura: The People's Bank of China's policy measures meet expectations, maintaining the forecast of a 10 basis point cut in policy interest rates and a 50 basis point reserve requirement ratio reduction for the whole year

Nomura's report indicates that the People's Bank of China (PBOC) announced a series of measures yesterday (15th) that are largely in line with expectations. The bank believes that since September last year, the PBOC should avoid high-profile monetary easing measures such as interest rate cuts and reserve requirement ratio reductions to prevent exacerbating an already overheated stock market. This latest action is seen as the correct response to the rapid deterioration of economic momentum in the mainland and also reflects the increasing concern of mainland authorities regarding growth trends. Last Friday (9th), the State Council committed to reducing financing costs for consumers and businesses, and this easing measure may help address related issues.

The report cites PBOC Vice Governor Zou Lan as saying that there is still room for lowering the reserve requirement ratio and interest rates, and noted that the RMB exchange rate is currently relatively stable, with the US dollar in a rate-cutting cycle, meaning that the exchange rate does not pose a strong constraint. The bank believes that the PBOC's actions and the Vice Governor's remarks align with its forecast of a one-time reduction in the policy interest rate and reserve requirement ratio by 10 and 50 basis points respectively this year, with the baseline scenario expected to be realized in the second quarter