The People's Bank of China is choosing not to follow many other major central banks in cutting interest rates as it tries to navigate a challenging economic environment.
On Monday, China's central bank set its new "loan prime rate" exactly the same for October as September.
For Dan Wang, China analyst at The Economist Intelligence Unit, the People's Bank of China needs to balance efforts to reduce interest rates in the long term without cutting short-term rates too drastically. Analysts also noted how the central bank's neutral position may be an effort to address worries of rising inflation caused by soaring pork prices.Giulia Marchi | Bloomberg | Getty Imagesis choosing not to follow many other major central banks in cutting interest rates as it tries to navigate a challenging economic environment.
China's central bank must manage an economy structured in many ways quite differently from that of other major regions, such as Japan or the European Union. But the PBoC faces the same question of how effective monetary policy can be today. That has significant implications for the central bank's signalling, which appeared to take a neutral stance on Monday.
"The central bank would not like citizens' to develop expectations for higher inflation, and so will not likely quickly lower policy rates,‘’ Xu Chenxi, senior analyst of fixed income at Nanhua Futures, said in a Chinese language statement translated by CNBC. "The policy is more concerned with its transmission to the real economy.
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