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Goldman's Two-Word Summary Of The PBOC Rate Cut: "Slightly Useful"
Via Goldman Sachs' Yu Song,
The PBOC cut the benchmark lending and deposit rates by 40 bp and 25 bp, respectively. Meanwhile, the deposit rate ceiling was increased to 1.2 times the benchmark deposit rate (from 1.1 previously), effective from Nov 22. The one-year benchmark lending rate will stand at 5.6% (vs 6% previously) and one-year benchmark deposit rate at 2.75% (vs 3% previously).
The change is in response to the weakness in economic growth and falling inflation. High-frequency data available to select government officials may have shown significant weakening, which was likely impacted by (1) the APEC related shutdowns, (2) weakening of underlying export growth amid mixed global activity growth and the recent appreciation of the CNY exchange rate and (3) tighter domestic liquidity conditions. Although nominal interest rates have been relatively stable, real rates have been on the rise in recent months amid lower inflation, which is effectively monetary tightening.
The effects of the cut in the benchmark lending rate are likely to be small since lending rates are not currently subject to either upper or lower limits. It may however be slightly useful to borrowers in negotiations with lenders, in our view.
The deposit rate is effectively unchanged (one-year deposit rate will range from 2.75% to 3.3% vs previously from 3% to 3.3%) because the cut in the benchmark rate is fully offset by the rise in the deposit rate ceiling (assuming commercial banks utilize nearly 100% of the upside from the benchmark rate to the ceiling. We believe they will be likely to do so given the competition for deposits). We believe the reluctance to cut the deposit rate could be because the government wishes to avoid any negative impact on household income growth.
Thus the move itself is unlikely to have a big direct impact on the economy. But the indirect effects could be meaningful because today's move sends a very clear signal to the market on policy intention. When the government intends to loosen its macro policy stance, it typically uses a range of policy tools instead of relying on just one or two. Full RRR cuts face a higher hurdle as they have more substitutes such as targeted RRR cuts, relending and its equivalents (PSL, MLF etc.). We expect the government to step up fiscal expenditure allocation and add more pressure on local government to act to support the economy, especially via speeding up infrastructure construction. These measures were the key in the growth rebound in 2Q of this year and will likely to be supportive of growth again in the rest of the year.
This is nevertheless a positive step in interest rate liberalization, in our view.
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Wake me when we get to hear Goldman's last words. Arrest Loyd Blankfein
Shit.. How much louder can Goldman ring the bell for the top of this """market"""!?
"Thus the move itself is unlikely to have a big direct impact on the economy."
This is really funny because it implies Goldie actually cares about the economy as opposed to their own carry trade p/l.
In Goldman speak, slightly useful=minor fucking....
More debt is great news because we just monetize it all now and fuck over the plebs. Reworded it for you Goldmans
Party on ..... Long printing presses and ink....
Looks like everything is fine and nothing can ding precious stawks as long as someone can keep 'surprise rate cuts' coming daily!
Because Ink and Paper will NEVER be a Barbarous Relic like worthless Gold.
So all of Asia has already or will cut rates (I'm sure Korea and India are next week). The Swiss are going to give every citizen $2600 a month. Draghi will some way somehow, jawbone the Germans into it, and yet the US is going to raise rates. I don't believe it.
This is how we get sucked in by the money siren’s calls “…Buy stocks now the party is hopping… Money is still free and plentiful… Times are good…” So it is always profits now and apocalypse later. Except for some rich guy who is selling everything he owns as we buy. This is how they rearrange the deck chairs on the Titanic…
There cannot be single bear left alive that is not in total shock and awe of the power of the central bankers. Rate cuts, jawboning, massive, endless money printing have created a euphoria that words cannot fully describe. The bankers now come right out and say they will buy all assets, including stocks, if they need to. They will create trillions $ more, and buy every equity market if that what it takes. You cannot fight this. NO Way, no how. Their power to print appears limitless. This is truly a New Normal and new World Order unfolding before your eyes.
when the BIS, the fed. has bought the stock market enough with your TAX-DOLLARS, and all your PERSONAL DOLLARS are in the market, they'll crash it, not just a little, but 80%-90%.
the fed. through hft's will manipulate the markets down in stead of up, you'll try to compete for the few stocks that are available with the fed. and their hft's, until they own all outstanding shares.
every one will sell, or be forced to sell, guess who are majority stock-holders of all americas co.'s.
usually facist have to take over a countries communications, factories, political power, and the citizens wealth, by war, or some kind of overwhelming force, america paid for the overtaking of their country, so far.
which ever co. ceo's have as their majority of personal assets, their shares in their co. there's the cronies, they know in the end they'll be partners with the fed., (govt.).