China: Inflation to accelerate further in near-term – Goldman Sachs
|Research Team at Goldman Sachs expects Chinese PPI inflation to accelerate further in the near term and CPI inflation to reach 2.5%.
Key Quotes
“Thus far, the big change has been a sharp turn in producer price inflation, which in turn has been driven by renminbi depreciation and by a rebound in global commodity prices (with selected Chinese commodity prices boosted by policies to improve pricing power for key upstream industries, particularly production restrictions).”
“Down the road, however, we see the possibility of a broader turn in inflation pressures if policymakers insist on keeping growth in the mid-6% range in an environment of falling potential growth. Whereas historically the growth target could be thought of as an “out of the money put”, it is now a more binding constraint on policy, and has required substantial stimulus to achieve.”
“We expect interbank repo rates to remain fairly volatile in the near term, given growth has been broadly stable and policymakers have refocused on managing the leverage situation (not only in the real economy but also within the financial system). Rates are likely to ease materially only if either non-banks’ leverage in the interbank market moderates and/or economic growth slows significantly (which we anticipate for Q1 ’17), in our view. Should inflation surprise on the upside, however, upward pressure on rates may persist for even longer.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.