The probability of cuts to the reserve requirement ratio (RRR) or benchmark interest rate in June has been lowered due to a property price rally and the moderation of capital outflow, an Asian investment bank predicted.
"China's property price rally in May, which is associated with the recent credit boom, raised concerns over financial imbalances and, therefore, reduced the probability of RRR or rate cuts," said Nomura bank in a report on Tuesday.
Moreover, Nomura's U.S. economists expected the Federal Reserve interest rate hikes to be gradual, with the next hike likely in September, following a U.S. report showing slowing employment data.
"As such, RMB depreciation pressure should moderate, reducing capital outflow -- and the need to cut the RRR to sterilize them." Nomura said.
The investment bank announced it would remove its prediction of one RRR cut in the second quarter from the report, forecasting two more RRR cuts and one rate cut in the second half year.
In May, property prices rose by 26.8 percent year on year in first tier cities including Beijing, Shanghai and Shenzhen, Nomura quoted a survey by the China Real Estate Index System (CREIS) as saying.
