SHANGHAI ((Reuters)) – China should choose the right timing and force in easing monetary policy, state media said on Saturday in the latest signal that further easing to boost the world’s second-largest economy may not be imminent.
Days before the article in the official Shanghai Securities News, the central bank pledged to adjust monetary policy at the appropriate time to support an economy facing escalating trade tensions with the U.S.
On Friday, the central bank-owned Financial News called for finding the right tempo in adjusting monetary policies.
The series of comments could further dampen expectations for an imminent cut in interest rates or in banks’ reserve requirement ratios.
While China still has room to loosen policy, “cutting rates or RRR at the appropriate time means choosing the right timing and strength, so as to make the best use of policy tools to cope with various uncertainties in the future,” the Shanghai Securities News said.
“China’s monetary policy needs to balance between supporting the economy and preventing risks, and is also constrained by Sino-U.S. yield differentials as well as domestic banks’ interest margins.”
China cut both benchmark interest rates and the RRRs twice last year to bolster the struggling economy. The People’s Bank of China has not cut rates this year despite U.S. President Donald Trump raising tariffs on Chinese goods, putting pressure on an economy mired in deflation and weak consumption.
Policy easing, including the use of structural tools, is not just about cutting interest rates or RRRs, the Financial News said in its Friday editorial, adding that monetary easing does not necessarily translate to credit easing, as financial stimulus alone does not lead to a sustainable boom in consumption.
Investors are “giving up on further monetary easing,” wrote Zichun Huang, China economist at Capital Economics, citing recent rises in bond yields.
Since China’s slew of stimulus measures, Huang wrote, “there have been no policy rate reductions… and the monetary targets set at the National People’s Congress suggested if anything that policy this year will be even less expansive than in 2024.”
(Reporting by Shanghai Newsroom; Editing by William)
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