- PBOC sees no base for long-term disinflation, officials say
- Central bank hasn’t taken steps toward major stimulus in 2023
According to Bloomberg article published on April 20, 2023, the People’s Bank of China pledged to make sure interest rates are appropriate and that credit remains stable as it implements “prudent” monetary policy this year.
Central bank officials reiterated a promise to keep policy forceful and targeted during a press briefing with reporters in Beijing on Thursday.
The authorities also sought to soothe concerns about easing inflation.
“China’s consumer prices are rising mildly currently,” said Zou Lan, head of the monetary policy department, adding that economic growth in the country has created a situation that is “obviously different from disinflation.”
It takes time for policy support on the supply side to pass onto the demand side, Zou added.
The PBOC has not taken steps toward major stimulus measures this year, refraining from cutting interest rates, but instead lowering the reserve requirement ratio for banks in March to inject long-term liquidity into the banking system. The central bank last cut the interest rate on its one-year policy loans in August 2022.
China’s economic recovery is strengthening, underpinned by consumer spending and a rebound in the property market. Growth accelerated to 4.5% in the first quarter, putting Beijing on track to meet its growth goal of about 5% this year.
PBOC Governor Yi Gang said earlier this month that China is expected to achieve around 5% growth this year as the property market improves. Inflation remained stable, he said, with consumer-price growth continuing to ease in March.
Markets are watching closely how the PBOC will respond to the rapid expansion in credit, which exceeded expectations for three straight months. There are concerns over whether money is flowing into the real economy or staying in the financial system.
In a sign that authorities are taking time to evaluate the effect of previous easing, the central bank earlier this week injected the least amount of medium-term cash into the banking system since November.
