PBOC not using QE to lift economy
Print Edition
China’s central bank is not using QE, or quantitative easing, to boost the economy but will instead adjust interest rates and bank reserve requirement ratio to fight deflationary pressure and capital outflow, it said in a statement yesterday.
The People’s Bank of China clarified after the central bank last Friday made its sixth interest rate cut and the fifth bank reserve requirement cut within the past 12 months, stoking worries that it is directly injecting money in the market to further stimulate the economy.
“The most recent cuts of interest rates and bank reserve requirement ratio are reasonable and necessary monetary policies,” the statement said. “These are not a kind of non-conventional QE measures.”
QE refers to a monetary policy where the central bank prints money to buys bonds and loans from banks, boosting liquidity and the balance sheet of the central bank.
The move is often seen as a last resort to stimulate the economy if a recession or depression continues even when the central bank has cut interest rates to zero and can’t lower them anymore.
The latest cuts bring the benchmark one-year deposit rate to 1.5 percent and lending rate to 4.35 percent. Large banks have to set aside 17 percent of the deposits they take as reserves with the PBOC.
“China’s interest rates are above zero, and the bank reserve requirement ratio is still relatively high,” the central bank said.
“We still have room to use interest rate and reserve requirement tools when considering monetary policy support.”
Economists said China will still cut interest rates and bank reserve requirement ratio to lift the economy from a protracted slowdown where the year-on-year growth hit a six-year low of 6.9 percent in the first three quarters of this year.
“The latest monetary policy action by China is in line with our view that as underlying growth slows, China’s authorities are likely to respond with additional stimulus,” Moody’s Investors Service said in a note yesterday.
Moody’s sees the stimulus as preventing growth from slowing more rapidly, not raising it to sharply higher levels.
- 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.
