Analysts believe that although the exchange rate of the RMB against the US dollar has fallen to 7, it may be difficult to prevent the Bank of China from relaxing the monetary policy to support the troubled economy.
According to Bloomberg, the People's Bank of China lowered the bank's foreign exchange deposit reserve ratio on Monday (5th).
But economists pointed out that the latest measures should not prevent the Bank of China from continuing to relax monetary policy, including reducing bank deposit reserves, reducing interest rates, or expanding the use of structural policy tools.They believe that the economy still needs more central bank support. This year, the growth rate will be expected to slow to 3.5%, and it will face multiple risks from the emergence of the epidemic to the real estate market crisis, which will continue to pressure the economic prospects.
Tianfeng Securities' analysts headed by Sun Binbin wrote on Tuesday (6th) that the People's Bank of China issued signals: a more stable RMB does not mean that the central bank is also more constrained.They said that due to weak economic recovery, credit growth is still downturn, and the epidemic is unbelievable, the central bank still needs to maintain a loose position.
The central bank has taken a restraint on launching stimulus measures this year, partly because it tries to achieve difficult balance between multiple goals: support growth, maintain stability of RMB, prevent inflation and avoid debt risk.
The Bank of China accidentally lowered a major interest rate last month, which shows that it urgently needs to reduce the cost of lending and enhance confidence, especially the confidence of home buyers.Although the exchange rate of the RMB against the US dollar has fallen 6.6%since the beginning of the year, and the central bank has lowered the foreign exchange deposit reserve ratio in late April, it still decides to cut interest rates.
Officials of the People's Bank of China have stated that they have sufficient monetary policy space, especially when inflation is still sluggish.Vice President Liu Guoqiang emphasized on Monday that the policy space is "sufficient" and rich in policy tools. There is no shortage of price tools nor lack of quantitative tools.
He said that the People's Bank of China will make loans more stable and promote banks to make good use of the recent deposit interest rate reform to reduce borrowing costs.Tianfeng Securities said that the comment implied that the bank would lower the loan market quotation interest rate (LPR) again by the end of the year.
Analysts believe that the possibility of changes in the policy loan interest rate of the People's Bank of China is less likely to change in the short term. Officials may want to first observe the impact of recently announced stimulating measures on the economy.They said that the deposit reserve ratio is more likely to be reduced in December.
The chief economist of CITIC Securities clearly believes that even if the People's Bank of China does not reduce the policy interest rate, LPR may decline.Obviously, there is not much need to reduce the deposit reserve rate at present, because the liquidity in the interbank system has accumulated, and the reduction may lead to asset bubbles.
Pang Yan, director and chief economist of the Research Department of the Greater China, said that if the economy is still strong, there will still be room for interest rate cuts and references by the end of the year.
