China’s central bank could further ease monetary policy in the first half of this year to stave off headwinds and ensure economic stability, a Bloomberg survey of economists showed.
The People’s Bank of China (PBOC) is expected to lower the amount of money banks must keep in reserve in the first quarter of this year, bringing down the ratio for major banks to 11 percent.
Major policy interest rates — the one-year medium-term lending facility rate, one-year loan prime rate and seven-day reverse repurchase rate — are likely to be reduced by 10 basis points each in the second quarter, the survey said.
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China’s economic growth slowed to 4 percent in the final three months of last year, and the government and central bank have made clear there would be more action this year to support expansion and stabilize the economy.
The central bank cut borrowing costs earlier this week, with banks following the move on Thursday by reducing the interest rate on one-year and five-year loans.
“The PBOC is going to ease monetary policy more proactively. That means it will not wait until the GDP data shows weakness of the economy,” ING Bank Hong Kong chief China economist Iris Pang (彭藹嬈) said. “Fiscal spending on infrastructure investments are likely to speed up, which will give GDP growth a boost.”
Two front-page reports in major financial newspapers yesterday said that China would likely introduce more policies to support economic growth.
Other major points in the survey showed that the median growth forecast for this year continues to be 5.2 percent, while the outlook for next year was lowered to 5.2 percent from 5.3 percent.
Factory inflation is seen moderating to 3.7 percent, while fixed-asset investment and retail sales growth were higher at 5.3 percent and 6.8 percent respectively.
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