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Counter-Cyclical Monetary Policies Within Expectations

Sep 18-2019   



The past tends to show that the last quarter of the year would be a crucial period for intensive releases of counter-cyclical macro policies. The economy being still under downward pressures, a slightly more powerful dose of counter-cyclical monetary policies is within expectations and reasonable, said Prof. Huang Yiping, Deputy Dean of the NSD, in a media interview.

 

The interview followed an early-September State Council executive meeting, presided over by Premiere Li Keqiang, which prescribed such policy tools as overall and targeted cuts of required reserve ratio in a prompt manner. This phrasing was a historic first.

 

Prof. Huang said that besides increasing liquidity, it's necessary to guide further reductions in market interest rates. The US has entered an interest-lowering corridor. Should the Fed push down interest rates in its mid-September meeting, more room will be afforded to China’s Central Bank.

 

Compared to monetary policies, China's fiscal policies are well positioned to turn it up a notch to offset potential risks. This requires top-level design and structural reforms.

 

As for the marketization of interest rates, the pivotal issue is to price loans based on risks and rein in vicious competition among the banks for deposits. Interest spreads are on due course to narrow in line with the ongoing market reform of interest rates. Therefore, the banks are well advised to improve profitability and competitiveness while also building up business varieties and spreading out risks.

Counter-Cyclical Monetary Policies Within Expectations

Sep 18-2019   



The past tends to show that the last quarter of the year would be a crucial period for intensive releases of counter-cyclical macro policies. The economy being still under downward pressures, a slightly more powerful dose of counter-cyclical monetary policies is within expectations and reasonable, said Prof. Huang Yiping, Deputy Dean of the NSD, in a media interview.

 

The interview followed an early-September State Council executive meeting, presided over by Premiere Li Keqiang, which prescribed such policy tools as overall and targeted cuts of required reserve ratio in a prompt manner. This phrasing was a historic first.

 

Prof. Huang said that besides increasing liquidity, it's necessary to guide further reductions in market interest rates. The US has entered an interest-lowering corridor. Should the Fed push down interest rates in its mid-September meeting, more room will be afforded to China’s Central Bank.

 

Compared to monetary policies, China's fiscal policies are well positioned to turn it up a notch to offset potential risks. This requires top-level design and structural reforms.

 

As for the marketization of interest rates, the pivotal issue is to price loans based on risks and rein in vicious competition among the banks for deposits. Interest spreads are on due course to narrow in line with the ongoing market reform of interest rates. Therefore, the banks are well advised to improve profitability and competitiveness while also building up business varieties and spreading out risks.