Rise in bill rate precursor to tightening measures
By Zhang Fengming |
January 9, 2010, Saturday
|
Print Edition
Print Edition
CHINA'S first rate increase on three-month central bank bills since August is likely to be followed by other monetary tightening measures, economists said yesterday.
The People's Bank of China has pledged to maintain its moderately loose monetary stance in 2010 but it also has to carefully manage the exit of stimulus measures to avoid asset bubbles emerging.
The PBOC on Thursday raised the yield on its three-month bill by 4 basis points, or 0.04 percentage point, to 1.3684 percent. The yield had been unchanged since August.
"The bill rate increase is fairly trivial but it is likely to be followed by further increases," said Alaistair Chan, an associate economist with Moody's Economy.com.
Past experience supports such expectations -- the previous central bank bill rate increase began in July with a 6-basis-point move, and the yield ended 36 basis points higher a month later.
Barclays Capital saw the rise in the three-month bill yield as the first step as they view the bill rate a key part of the monetary policy, along with controls on bank lending and the setting of key interest rates.
"While the rise is very small, the move is best seen as an early stage of an interest rate increase," Barclays said in a note yesterday. "We expect the central bank to increase the benchmark lending and deposits rates twice by a total of 54 basis points in the second half of this year."
The next step following the rise in the bill rate would be higher reserve requirements for commercial banks, which cuts the amount of capital available for lending and lessens the impact of sour loans on bank balance sheets. Bank deposit and lending rates could be next to rise.
The People's Bank of China has pledged to maintain its moderately loose monetary stance in 2010 but it also has to carefully manage the exit of stimulus measures to avoid asset bubbles emerging.
The PBOC on Thursday raised the yield on its three-month bill by 4 basis points, or 0.04 percentage point, to 1.3684 percent. The yield had been unchanged since August.
"The bill rate increase is fairly trivial but it is likely to be followed by further increases," said Alaistair Chan, an associate economist with Moody's Economy.com.
Past experience supports such expectations -- the previous central bank bill rate increase began in July with a 6-basis-point move, and the yield ended 36 basis points higher a month later.
Barclays Capital saw the rise in the three-month bill yield as the first step as they view the bill rate a key part of the monetary policy, along with controls on bank lending and the setting of key interest rates.
"While the rise is very small, the move is best seen as an early stage of an interest rate increase," Barclays said in a note yesterday. "We expect the central bank to increase the benchmark lending and deposits rates twice by a total of 54 basis points in the second half of this year."
The next step following the rise in the bill rate would be higher reserve requirements for commercial banks, which cuts the amount of capital available for lending and lessens the impact of sour loans on bank balance sheets. Bank deposit and lending rates could be next to rise.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
