Coronavirus: Fed rate cut has ‘opened the window’ for China to pursue more aggressive economic policy
- After the US Federal Reserve’s surprise 50 basis point cut to interest rates – the biggest since the global financial crisis – China is tipped to follow suit
- Central bank expected to embark on more aggressive monetary loosening to counter coronavirus impact on economy, according to state newspaper editorial
The US Federal Reserve’s surprise half-point cut to interest rates has paved the way for China’s central bank to further loosen monetary policy, as it seeks to steady an economy reeling from a novel coronavirus outbreak.
“It is a relatively good choice [for China] to adjust policy rates amid a wave of rate cuts by major central banks,” read the article, published by the official Xinhua news agency.
The very public pronouncement echoed an increasingly loud chorus of analysts pushing for the PBOC to act more boldly, after its US peers made the biggest cut since the global financial crisis more than a decade ago.
China's central bank held a teleconference on Tuesday with delegates from the China Insurance and Banking Regulatory Commission, the Ministry of Finance and all major lenders, discussing how to offer financial support to the economy.
A PBOC statement said China would stick to its “prudent monetary policy stance” although the implementation will be “more flexible”. In particular, the central bank said it would fully maximise the Loan Prime Rate regime, but it did not mention benchmark interest rates.
The central bank also said China will not “use the property market as a means to stimulate short-term growth” and urged local authorities to keep consistent property funding policies, an apparent move to defy speculation that China would significantly relax mortgage rules.