China unlikely to follow expected US Federal Reserve rate cut despite economic slowdown, analysts say
- Analysts say the People’s Bank of China is unlikely to immediately follow a widely tipped rate cut by the US Federal Reserve
- The bank has promised ‘prudent monetary policy’ as it deals with domestic issues such as rising consumer inflation and the effects of the trade war with the US
China’s central bank is unlikely to immediately lower its benchmark lending rate in response to a widely expected third-straight interest-rate cut by the US Federal Reserve on Wednesday, analysts said.
Instead, the PBOC is likely to continue with its prudent monetary approach to maintain financial stability while ensuring adequate credit was available for private businesses and spending on infrastructure, analysts said.
“The PBOC could potentially become more reluctant to deliver high-profile stimulus in coming quarters,” Lu Ting, chief China economist at Nomura, said on Tuesday.
The Japanese investment bank postponed from the final quarter of this year to the first half of next year its forecast of a half-point cut in China’s reserve requirement ratio for all banks, which would free up more funds for lending. Nomura also estimated the first rate cut in the rate of the central bank’s the medium-term lending facility, the cost that banks pay to borrow cheaply from the PBOC, would be in the first half of next year.
Raymond Yeung, chief Greater China economist of ANZ Bank, said China’s current combination of fiscal, monetary and industrial policies showed that authorities were more concerned with medium-term economic trends than the short-term economic slowdown.