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央行超预期下调政策利率,稳增长措施再加码 Surprise rate cut to help solidify economic rebound

中国日报网 2022-08-16 17:27

Headquarters of the People's Bank of China (PBOC), the central bank, is pictured in Beijing, China. [Photo/Agencies]


China's central bank delivered surprise interest rate cuts on Monday, suggesting that the country is still willing to lend more monetary support on the aggregate front in the coming months despite a potential rise in structural inflationary pressure, experts said.

Thanks to Monday's rate cuts, the country's loan prime rates-or the market-driven benchmark lending rates-are likely to see reductions this month, helping revive corporate credit demand and mitigate a real estate slowdown, they said.

The People's Bank of China conducted 400 billion yuan ($59.2 billion) in medium-term lending facility operations on Monday at an interest rate of 2.75 percent, down from 2.85 percent a month earlier.

Using the MLF rate as a key policy benchmark, the PBOC had kept it unchanged for six months until Monday's reduction. The interest rate of seven-day reverse repurchase agreements was also trimmed by 10 basis points to 2 percent on Monday.

Most market participants had not expected the central bank to launch the rate cuts as it had flagged the risk of structural inflationary pressure and its intention to fend off cross-border capital outflow risks amid overseas monetary tightening in a report last week.

Upon the unexpected rate cuts, futures contracts for China's government bonds rose on Monday. Main contracts for 10-year, five-year and two-year government bond futures ended Monday's trading up 0.7 percent, 0.52 percent and 0.19 percent, respectively, according to market tracker Wind Info.

Experts said Monday's rate cuts will reassure the market about the central bank's priority of growth stabilization among multiple policy goals, especially as the latest economic and financial data have underlined the necessity of strengthening macroeconomic policy support.

The National Bureau of Statistics said on Monday that the country's recovery in consumer and investment activity has slowed due to factors including renewed COVID-19 cases and a real estate downturn.

Retail sales rose 2.7 percent year-on-year in July, down from 3.1 percent in June. Fixed-asset investment expanded by 5.7 percent in the January-July period, down from 6.1 percent for the January-June period, dragged by a 6.4 percent decline in real estate development investment, the NBS said.

Credit demand also cooled in July as China's increment in aggregate social financing-the total amount of financing to the real economy-stood at 756.1 billion yuan last month, down by 319.1 billion yuan from a year ago, the central bank reported on Friday.

The MLF rate cut may only be the first step to ramp up monetary support, analysts with Soochow Securities said in a report.

Wen Bin, chief economist at China Minsheng Bank, said the possibility of another interest rate cut cannot be ruled out as the PBOC's policy setting still takes domestic factors as dominant determinants while the pace of the Fed's tightening slows in the US.

Moreover, Wen said it is possible for the PBOC to reduce the reserve requirement ratio in the fourth quarter to boost long-term liquidity and reduce banks' funding costs. 


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