China's subdued inflation leaves room for further easing - Nomura

FXStreet (Bali) - China's subdued inflation in October leaves room for further policy easing, notes the Chinese Economics Team at Nomura.

Key Quotes

"China's CPI inflation remained low at 1.6% y-o-y in October, unchanged from September, largely reflecting weak domestic demand (Consensus: 1.6%; Nomura: 1.5%). PPI deflation worsened more than expected to 2.2% y-o-y from 1.8% (Consensus and Nomura: 2.0%). Falling commodity prices and worsening overcapacity in upstream industries due to the ongoing property market correction could be major factors contributing to the PPI deflation."

"The subdued inflation indicates a soft start to Q4 and leaves room for further policy easing. We continue to expect one 50bp cut to the bank reserve requirement ratio in each quarter from now to Q4 2015, in addition to further piecemeal, targeted easing measures (see China’s loss of growth momentum may be coming to an end, 22 October 2014). We continue to expect a short-lived growth rebound to 7.6% y-o-y in Q4 from
7.3% in Q3 before growth slows to 6.8% in 2015."