Economists at Standard Chartered update their Chinese inflation and growth forecasts. 

Low inflation unlikely to prompt a policy rate cut 

“We expect China’s core inflation to rise to above 2% YoY by end-2023 on continued economic recovery, less than we originally expected due to the slack in the economy amid the global slowdown.”

“While growth may rebound to 5.8% or higher in 2023, our estimate suggests GDP will stay below trend at end-2023, although the negative output gap may narrow. Under our revised forecasts, headline CPI inflation will rise to 1.8% YoY at end-2023, averaging 1.0% for the full year. We keep our 2024 average CPI inflation forecast at 2.5%.” 

“CPI inflation may approach zero in the next few months as the crude price spike in H1- 2022 created a high base.”

“We think the People’s Bank of China (PBoC) will also pay close attention to the core inflation trajectory, which should show an uptrend and mitigate concerns over deflation. With interest rates already at historical lows and growth likely to comfortably beat the 5% target, we do not expect the PBoC to cut policy rates in the foreseeable future.”