China’s central bank is not yet ready to cut benchmark interest rates to spur the slowing economy, despite cooling inflation and a stronger yuan, which have fanned market expectations of such a move, policy sources told Reuters, according to Reuters.
But the People’s Bank of China (PBOC) is likely to cut market-based rates and further lower banks’ reserve ratios (RRR) to boost credit growth and reduce firms’ borrowing costs, according to the sources involved in internal policy discussions.
“We cannot rule out a (benchmark) rate cut, but we still need to watch economic data for a few months,” one said.
“There is no sufficient reason for cutting benchmark rates if we look at the huge amount of new loans in January.”
China’s trading partners and major central banks are increasingly concerned over how quickly the world’s second-largest economy is decelerating and much it will drag on global growth.
Premier Li Keqiang reiterated on Wednesday that China will not resort to “flood-like” stimulus like that unleashed in past downturns.
But after a spate of weak data, investors are asking if Beijing needs to speed up or intensify support to reduce the risk of a sharper slowdown.