Analysis: China likely to maintain monetary policy stable in near term
BEIJING, Feb 28, 2013 (Xinhua via COMTEX) --
China is likely to maintain its
monetary policy stable in March, in which case the flexible use of
repos and reserve repos would become the major tool for the country's
central bank to keep relatively ample market liquidity.
As the Chinese economy is stabilizing and begins to rebound, the
necessity to stimulate the economy via loosening monetary policy is
abating. The target of the country's monetary policy will focus on
maintaining stable market liquidity.
The HSBC's preview for China's manufacturing purchasing managers
index (PMI) dropped to a four-month low to stand at 50.4 in February,
but analysts widely believe that Chinese economy is still on track
for a gradual recovery, despite the moderation of February's flash
In addition, the rise of price levels has also restricted the room
for further loosening monetary policy. Institutions widely predict
that the Consumer Price Index (CPI) in February will rise 3 percent
on food price hikes. In view of the rising housing prices and social
financing, market expectations for inflation have gone strong.
Positions for foreign exchange purchase, an important factor
affecting China's market liquidity, are expected to go up steadily,
on the rising expectation of the appreciation of the RMB and the
recovery of the Chinese economy.
On this expectation, market liquidity is expected to remain
relatively ample in the near term, in turn reducing the necessity for
the central bank to cut reserve requirement ratio (RRR).
In the near term China's central bank will likely continue to
maintain a prudent or relatively loose monetary policy to ensure
support for the economy.
The central bank is likely to maintain the RRR and interest rates
unchanged in near term, and the flexible use of repos and reserve
repos will become the major tool for the central bank to manage
market liquidity. (Edited by Jiang Yujuan, firstname.lastname@example.org)
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