China's Stimulus Continues: Rate Cuts and Weak Activity Data
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China: Further rate cuts and weak activity data
After the rate cuts yesterday, the 1Y medium-term lending facility (1Y MLF) was cut 10bp today. Weak activity data mean that this is probably not the end of the stimulus, though the more important measures are likely to be fiscal.
1Y MLF cut 10bp
After the cut of the 7-day reverse repo rate by 10bp yesterday, it was no surprise to see the 1Y MLF rate also cut by 10bp, taking it down to 2.65%. Lending volumes also rose to CNY237bn, above the CNY200bn expected. Still, this is not going to move the needle for Chinese activity particularly. More easing will be needed, and though there does look like a good case for further monetary policy easing in the months ahead, the bulk of the authorities' response will probably need to come from targeted fiscal measures.
New home prices still rising, but only just
Ahead of the bulk of the activity data, new home prices showed a fifth consecutive month without falling. Though the rate of increase was only 0.1% MoM, which is down on the recent trend and may indicate momentum slowing in this part of the economy.
70-city new home prices
