Like other major contemporary banks, People’s Bank of China chooses not to resort to slashing interest rates as a manner of dealing with changes in the economic environment. The Central bank of China is in charge of looking after a region which is different from the other major economies like the European Nations and Japan. Yet, the question regarding the efficiency of monetary policies is currently being faced by PBoC. The Central bank seems to be taking a neutral attitude towards the upcoming economic change predictions
According to XuChenxi from Nanhua Futures, the bank is not resorting to interest rates slash as it does not want the citizens of China to develop misconceptions of inflation in the market. If the economy is capable of gaining the finance easily or the finance rates fall, there will be no need for modifications to the current monetary policy.
On Monday, the central bank of China put forward its new prime rates for loans. They remain the same as September; 4.85% being the rate for five-years and 4.2% being the rate for a year. This rate, also known as the LPR is set on a monthly basis. It is a way to promote the influence of market forces on interest, thus reducing financing costs. The LPR remaining unchanged for October is a sign of a neutral stance the central bank has opted to take. It also remains possible that the upward trend in the CPI is acting as a restriction on the monetary policies. This observation was voiced by Hong Liang, a chief economist and an analyst in CICC.
The tariff imposition by US on Chinese goods worth billions of dollars has also played an important role in weakening the Yuan. However, China must put an end to further criticisms that have the potential of hampering the currency value of the nation.