Monday, 6 April 2015

China’s central bank says to focus more on ‘degree of tightness’ in policy

In World Economy News 06/04/2015

China’s central bank said it would focus more on finding the right “degree of tightness” in monetary policy to keep the economy stable, adding to recent comments that it wanted policy to be neither too loose nor too tight.
Authorities should not underestimate the complexities that are clouding the outlook of the world’s second-biggest economy, the central bank said in a short statement after the first-quarter meeting of its monetary policy committee.
Hurt by a cooling property sector – where prices fell at a record pace last month – and a slowdown in exports and investment, China’s economic growth is expected to slip to around 7 percent this year, the worst in a quarter of a century.
Acknowledging the risks, the central bank said that although the U.S. economy was showing positive signs of growth, the euro zone faced deflationary dangers and some emerging markets were struggling against a backdrop of volatile commodity prices.
In this environment, China will “continue to implement prudent monetary policy, and increase focus on the appropriate degree of tightness” in policy, the People’s Bank of China said.
Worried about the cooling economy, senior Chinese policymakers have said in recent months that they wanted to ensure monetary policy was not too tight or too loose.
In the space of three months, the central bank has twice lowered interest rates and also reduced the amount of reserves that banks must hold in an attempt to spur lending.
But with the economy still showing signs of losing momentum, many analysts expect China to further cut rates, relax reserve requirements and provide additional aid to ailing sectors such as the housing market this year.
Friday’s statement did not give any clues about the future of monetary policy, except to say that credit growth would be kept at a “reasonable” rate.
The central bank also reiterated China’s plans for financial and economic reforms.
Companies would be encouraged to carry out direct fund-raising to lower their credit costs, it said. Reforms in the interest rate and foreign exchange markets would also be deepened.
The yuan would be kept at a “reasonable and balanced” level to keep it basically stable, the bank said, repeating its regular line on the currency outlook.

Source: Reuters (Reporting by Koh Gui Qing; Editing by Alan Raybould)