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Moody’s: Further stimulus unlikely
Print Edition
CHINA is unlikely to launch further aggressive credit stimulus after the recent cut in interest rates, and its economy will remain stable as it gradually slows, analysts said.
“Any aggressive credit stimulus in China appears unlikely,” Moody’s Investors Service said yesterday, adding that the “government aims to shift the economy away from a debt-fueled growth.”
Moody’s said in a statement that China’s recent cut in benchmark interest rates, the first in more than two years, is consistent with its prudent monetary policy stance and the main objective of the cut is to sustain growth in employment.
Last Friday, the People’s Bank of China unexpectedly announced a cut in the interest rate for one-year deposit by 25 basis points and the one-year lending rate by 40 basis points — the first such move since July 2012.
The stock market has responded strongly so far. There were still calls to ease policies further but the PBOC has said it’s tolerant of slower growth.
China’s gross domestic product grew at the slowest pace of 7.3 percent in over five years in the third quarter, led by corrections in the property sector.
Wendy Chen, an analyst with Nomura, said the rate cut will ease worries of slowing growth in the near term and calm risks of capital flight.
“We are now more confident with our forecast of 7.3 percent GDP growth in the fourth quarter,” Chen said.
“But intense policy easing is not likely since it will increase the risk of exacerbating China’s weak economic fundamentals and create bigger problems further out.”
Chen predicted no more interest rate cut but said the reserve requirement ratio, or the money commercial banks must set aside as reserves, would be trimmed every quarter from now through the end of 2015.
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