China PBOC unlikely to cut benchmark deposit and loan interest rates in short term

Photo: People's Bank of China, China's central bank 

BEIJING, Feb. 19 (Xinhua) -- People's Bank of China (PBOC), China's central bank, has a fairly low probability in cutting the benchmark deposit and loan interest rates in the short term, according to experts quoted by the Xinhua-run Economic Information Daily as saying on Tuesday.

Experts point out that the PBOC will continue to guide interest rate downward and reduce corporate financing costs. In terms of mode selection, cuts in the open market operating rate in an orderly manner and the use of the targeted medium-term lending facility (TMLF) will be more preferred.

The deposit and loan interest rates does not need to be adjusted in the short term as the market interest rates has already fallen and the signal of the move is too strong, which may send an error signal to the market, said Dong Ximiao, deputy dean of Chongyang Institute for Financial Studies at Renmin University of China (RDCY)

With the easing of the monetary policies of the world's major central banks and the decline in domestic inflationary pressures, whether the PBOC will cut interest rates has become a hot topic.

Sun Guofeng, director of the Monetary Policy Department of the PBOC, recently said that it is necessary to pay more attention to the changes in the actual loan interest rate and the role of the central bank's policy interest rate in guiding the market interest rates and credit interest rates.

The monetary policies of developed countries have shifted from tightening to re-relaxation, reducing pressure on emerging markets and developing countries where the economic performances remain weak, and increasing the room for stimulus, said Zhao Qingming, chief economist at the research institute of the China Financial Futures Exchange (CFFEX).

In addition to external factors, the reduction of internal inflationary pressure has also provided more room for the adjustment of China's monetary policy.

According to the latest data released by the National Bureau of Statistics (NBS), the country's consumer price index (CPI) rose by 1.7 percent year on year in January 2019, the lowest level since February 2018.

Industry insiders note that the PBOC has already adopted a variety of means to maintain reasonable market liquidity and guide the interest rate downward, including all-round and targeted cuts in reserve requirement ratio (RRR), orderly reduction of open market operating rates and TMLF operations. In the future, there will be higher probability and more space to use such tools. (Edited by Hu Pingchao, hupingchao@xinhua.org)