China’s central bank has indicated that it will not raise benchmark interest rates any time soon, dispelling wild speculation that the warming-up in economy will prompt rates action by the People’s Bank of China (PBOC).
In its quarterly report released Wednesday, the bank said that it will continue following a moderately loose monetary policy. "The central bank will continue to ensure ample liquidity in the banking system and reasonably increase loans to fund the economy," the report said.
It also allayed fears that a colossal release of credit in the first quarter could trigger a rise in the equities market that will build up the inflationary pressure.
Analysts has said that the possibility for the central bank to further cut interest rates is getting slimmer, because the economy has shown increasing signs of stabilization and growth.
"Positive changes have taken place in the economy and the situation was better than expected in the first quarter, though the foundation for an immediate rebound is not yet solid," the report said.
Tao Dong, chief Asia economist of Credit Suisse in Hong Kong, is certain about the normalization of the country's monetary policy. "China's economy is recovering faster than the rest of the world, so its monetary policy will normalize before other economies," he told Bloomberg News.
The PBOC is likely to maintain the one-year lending rate at 5.31 percent this year and may start to raise it in 2010, Tao said.
New loans reached a record 1.89 trillion yuan in March, pushing the first quarter's total to 4.58 trillion yuan, very close to the 4.9 trillion yuan for the whole of last year.
"Unless the economy signals a strong recovery, the PBOC will not change its monetary policy," Dong Xian'an, an analyst with Southwest Security, said. "It may tighten it a bit in the following months, though."
By People’s Daily Online
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