According to Barclays economists, China’s persistently low inflation, muted domestic demand, and growing tariff tensions are likely to prompt the People’s Bank of China (PBOC) to implement further monetary easing in the coming months.
While the easing may not be immediate, Barclays says it’s becoming increasingly unavoidable. Factors such as expected U.S. Federal Reserve rate cuts, reduced pressure on the yuan, and a rebound in Chinese bond yields are giving the PBOC more flexibility to act.
Barclays maintains its forecast for a 20 basis point policy rate cut this year—split between two 10 bp cuts, one in Q2, and the other later in the year. It also expects 50 to 100 basis points of reserve requirement ratio (RRR) cuts to support liquidity and growth.