Contrarian Goldman, HSBC see 2012 interest rates cuts

Goldman Sachs Group (GS.NYSE) and HSBC Holdings (HBC.NYSE, HSBA.LSE) predict that the People’s Bank of China (PBoC) will cut interest rates in 2012, going against the predictions of most rival banks, Bloomberg reported. Economists at 11 of 19 banks surveyed by Bloomberg forecasted no change in interest rates as China seeks to continue to rein in inflation and three foresaw interest rate increases. Goldman, HSBC and three other banks expect interest rates to be cut. Inflation will remain too high to cut the one-year deposit rate from 3.5%, according to Mizuho Securities Asia, expressing the prevailing sentiment. But HSBC economist Ma Xiaoping said that interest rates will be cut after inflation falls to 3% in 2012. “The authorities should be careful that the loosening does not go too far in order to prevent a repeat of mistakes during the 2008 global financial crisis,” Ma said. The PBoC cut the reserve requirement for lenders earlier this week, indicating that fears of inflation may be subsiding.