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China Rate Cut, More Easing, Look Imminent: Strategist

Chinese policymakers are likely to cut interest rate and reserve ratio requirements this quarter, JPMorgan’s chief Asian and emerging markets equity strategist, Adrian Mowat, told CNBC’s “Squawk on the Street”on Thursday.

Grant Faint | Photodisc | Getty Images

“The story is still one of sluggish economic growth relative to China’s history and one in which we haven’t seen signs of the stimulus working through,” Mowat toldCNBC’s “Squawk on the Street.”

He noted that given recent policy stimulus, the economic data should be better by now, but he conceded that there’s always a lag with monetary stimulus.

China has cut interest rates twice since June. (Related: Is Window for China Rate Cut Closing?)

Data points like residential construction starts are also still significantly negative, Mowat said. “On a three-month average, residential construction starts are down 19 percent over last year,” he noted.

While that means there may be more weakness to come for the Chinese economy, “the economy is not flat on its back,” Mowat said, highlighting a 13 percent increasein retail sales in July and a 6 percent increase in car sales.

With China’s Consumer Price Index showing easing inflation, China has “more leeway to put in place more monetary and fiscal policy,” Mowat said. (Related: More Help Is at Hand for China’s Slowing Economy).

Consumer prices in China rose 1.8 percent in July, down from 2.2 percent in the previous month.

Mowat expects the Chinese authorities to act in the next six to eight weeks.

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