PBOC doesn’t want to follow the FED
July 10, 2017 Category Finance, Weekly
The People’s Bank of China (PBOC) wants to decouple itself from the U.S. Federal Reserve (FED) and other major central banks, but analysts are skeptical. China’s monetary authorities will not follow the FED in raising interest rates any time soon, as its economic recovery remains shaky and financial market sentiment is “sensitive”, the Economic Daily said in a commentary. The PBOC shrugged off the FED’s fourth interest rate hike in two and a half years last month, despite its previous two rate increases – at the end of 2015 and 2016 – triggering massive outflows of funds from China and a sharp depreciation of the yuan. “China’s monetary policy will not dance to the FED’s tune,” the commentary said. While avoiding interest rate hikes, the People’s Bank of China has permitted a steady rise in money market rates and imposed strict capital account controls to curb outbound payments and investments. The commentary indicates that stability is the overwhelming concern this year, ahead of the Chinese Communist Party’s 19thcongress this autumn. It aims to dampen the expectation that China will raise interest rates later this year, which would worry companies and send jitters through the financial market. While China defines its monetary policy stance as “prudent”, it is beginning to look increasingly dovish as the FED talks about raising rates further and shrinking balance sheets, while the European Central Bank (ECB), Bank of England and Bank of Canada have started to tip the markets about scaling back monetary easing, or tapering, the South China Morning Post reports.
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