Goldman Sachs has postponed its forecast for China’s next round of monetary easing, citing a more restrained tone from the People’s Bank of China (PBOC) and a stronger focus on currency stability and structural reforms.
The bank now expects a 10bp policy rate cut and 50bp reserve ratio cut in Q1 2026, instead of late 2025, with a further 10bp rate cut moved to Q3 2026. Goldman said recent policy discussions around RMB internationalisation underscore Beijing’s commitment to FX management, suggesting a preference for gradual yuan appreciation over large-scale stimulus.
In its Q3 monetary policy report released on 11 November, the PBOC kept its “moderately loose” stance but emphasised cross-cyclical adjustments, which Goldman views as signalling a less dovish approach. The report also downplayed loan growth, pointing to a shift toward direct financing and the local government debt swap program as structural priorities.
Goldman added that CNY appreciation against the USD is expected to remain “gradual and choppy,” with the US dollar’s trajectory remaining the dominant driver. A faster rise in the yuan, the bank said, would require a clearer catalyst, such as exporter repatriation flows near year-end — a pattern observed in September.
The PBOC’s reference to maintaining exchange rate “flexibility” rather than “resilience” suggests reduced depreciation pressure, with Goldman concluding that FX stability is unlikely to constrain measured policy easing next year.
