China consumer price index (CPI) increased 1.4% year-on-year in November, a five-year low and down by 0.2 percentage points from the previous month, according to data released by China’s National Bureau of Statistics.
Producer price index (PPI) declined 2.7% year-on-year in October, compared with October’s 2.2% drop. The gauge has remained in negative territories for 33 consecutive months.
As the People’s Bank of China (PBoC) has exhausted its newly invented and ineffective policy tools, the next move will have to be a bank reserve requirement ratio (RRR) cut in order to regain policy effectiveness and credibility, according to a report by ANZ.
"If the PBoC were to set a M2 growth target at around 12-13% next year, we estimate at least three 50-basis-point RRR cuts will be possible over the course of 2015," says Liu Ligang, ANZ Greater China chief economist in the report.