Feb 22, 2019 (China Knowledge) - China’s central bank has voiced out that it already considers the country’s interest rates to be at relatively low levels due to rising financing costs abroad, dashing market expectations of a possible cut in benchmark rates.
Researchers at the People’s Bank of China (PBOC), the central bank, recently published a series of reports on China’s interest rate and monetary policies with a report finding that the country should remain cautious in using monetary policies to guide interest rates lower.
While the country’s interest rates are currently higher than those of developed countries, rates are still lower than those of developing and other BRIC nations.
Since taking on a series of measures to promote credit growth and lower borrowing costs in the country such as through repeated cuts in banks’ reserve requirement ratio, the market has come to believe that China may take to more powerful moves to cut benchmark interest rates.
As China’s interest rates are lower than that in countries such as Brazil and Russia and with actual rates in cities such as Shanghai, Beijing and Shenzhen lower than the national average, there are concerns over the stability of the yuan and the country’s foreign reserves.
In response to question over a possible rate cut, the PBOC’s head of monetary policy Sun Guofeng stated that the central bank should focus more on actual interest rates and allow policy rates to be better transmitted into lending costs.
In its quarterly monetary policy report, the central bank has said that it will continue to use prudent monetary policy with an emphasis on countercyclical adjustment and proper macro-regulation to achieve a balance between its multiple policy targets.
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