From BoA/Merrill Lynch research note (of 10 September 2015)

  • Policy easing to continue despite a moderate CPI increase

(BoA/ML referring to yesterday's CPI out of China)

  • There is still room for one to two interest rate cuts (25bp each) in the rest of the year
  • But we believe the chance for aggressive rate cuts is very small, given rising CPI inflation and capital outflow pressures
  • Domestic liquidity has become tighter partly due to capital outflows and PBoC ' s FX intervention
  • We expect at least 50 - 100bp in RRR cuts in coming months to offset the liquidity drain
  • The PBoC will also likely use multiple tools ... to flexibly manage domestic liquidity
  • Targeted credit support to key infrast ructure projects and SMEs are likely to expand

(Bolding is mine)