Central bank sticks to its prudent policy
CHINA’S central bank pledged ample domestic liquidity and a stable currency following Britain’s vote to leave the European Union.
The People’s Bank of China has already made “appropriate contingency plans” in connection with the British vote, it said online. “We will continue to implement prudent monetary policy, use various policy tools to maintain reasonable and adequate liquidity and maintain financial stability,” it said.
Some of the world’s biggest central banks offered financial backstops to soothe plunging markets after the vote, with some even intervening in currency markets on worries that volatility could hit growth.
Analysts said the vote could increase pressure on China’s central bank to ease policy, even as the government relies more on fiscal spending and tax cuts to underpin growth.
It injected 170 billion yuan (US$25.6 billion) into the money markets through seven-day reverse bond repurchase agreements yesterday, traders said.
“The central bank may cut banks’ reserve requirement ratios to pump out more liquidity and support market confidence,” said Nie Wen, an economist at Hwabao Trust in Shanghai. “But the chances of cutting interest rates are not high.”
The central bank has cut interest rates six times since November 2014 and reduced the amount of cash banks must set aside as reserves.
The central bank pledged to keep the yuan basically stable and will further improve the market-based yuan mechanism. It has long pledged to let market forces play a bigger role in setting exchange rate.
China yesterday called for Britain and the European Union to reach agreement as soon as possible after Britain voted to leave the bloc.
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