www射-国产免费一级-欧美福利-亚洲成人福利-成人一区在线观看-亚州成人

US EUROPE AFRICA ASIA 中文
Business / View

Deflationary pressures prompt another rate cut

By Wang Tao (chinadaily.com.cn) Updated: 2015-03-02 11:06

People's Bank of China cut benchmark rates by another 25 basis points, bringing the one-year benchmark lending rate to 5.35 percent and the one-year benchmark deposit rate to 2.5 percent, effective from March 1. Meanwhile, as another move towards interest rate liberalization, PBOC has lifted China's deposit rate ceiling further from 1.2 times of benchmark to 1.3 times.

The move came as no surprise following the particularly weak prints of January inflation, and another soft reading expected for February. Both CPI and PPI slipped to a 5-year low in January, to 0.8 percent year-on-year and negative 4.3 percent year-on-year respectively.

Although the shifting timing of Chinese New Year was to blame, underlying sequential momentum of core inflation (e.g., seasonally and CNY adjusted 3-month growth) did sink to the slowest pace since the global financial crisis. We expect February inflation will not have rebounded above 1 percent, adding further deflationary concerns.

The decline in inflation has rapidly pushed up real interest rate. The average of CPI and PPI has dropped substantially by 170 bps since Q4 2014 and 250 bps during the past 6 months, while the nominal interest rate has remained sticky despite the November rate cut, with average bank lending rates edging down only around 20 bps and our estimated overall financial cost barely moving. As a result, the real rate has moved up by +100 bps since Q4 2014 according to our estimation.

Deflationary pressures prompt another rate cut

Rapid increase in real interest rates means a tightening of monetary conditions, which stands in sharp contrast with softening real activity growth. Moreover, financial burden on the corporate sector has been aggravated. With industrial profit growth already mired in recession (total profit decreased 6 percent year-on-year and principal business profit fell 9 percent year-on-year in Q4 last year), risks are quickly building up at the financial system, prompting more monetary accommodation to mitigate massive tightening and contain financial risk.

PBOC has clearly become more concerned about deflationary pressure in recent weeks, as reflected in the latest monetary policy report and two PBOC research articles warning against deflationary pressures.

This cut in the benchmark rate should help lower the lending rate charged by banks, though the 25bps cut may not be passed through entirely since the ceiling on deposit rates are raised again, which effectively means an asymmetric rate cut and could squeeze banks' interest margin. The rate move can also help anchor inflation expectations before deflationary forces become entrenched. The resulting drop in real interest rates should help mitigate the worsening financial burden for the real economy and reduce the negative pressure on banks' asset quality, thereby containing financial risks.

Further monetary easing is still needed

Although one rate cut is helpful at the margin, it is insufficient to offset the passive tightening of monetary conditions so far, in our view. As highlighted in our earlier report, we think the PBOC should cut benchmark lending rates by 100 bps this year to keep real rates from rising, but expect the PBOC to only cut 50-75 bps. Therefore, more monetary accommodation is still warranted. The next rate cut could come in Q2 following persistent deflationary pressure and weak activity data.

In addition to the rate cut, we also believe the central bank need to cut RRR and use liquidity operations to help offset the drop in foreign exchange related liquidity, and ease loan quota and other lending restrictions.

To better support growth, we believe fiscal easing, relaxation of property policies (including cut of down payment requirement and transaction related taxes), and pro-growth reforms are likely in 2015, and see these measures to be more effective than monetary easing.

This article is co-authored with Harrison Hu, both UBS economists. The views do not necessarily reflect those of China Daily.

Hot Topics

Editor's Picks
...
主站蜘蛛池模板: 成人午夜久久 | 成年女人免费看片 | 国产精品久久国产精品99盘 | 可以看毛片的网址 | 亚洲欧美成人综合 | 色一欲一性一乱一区二区三区 | 99国产精品视频久久久久 | 国产综合成人亚洲区 | 中文字幕巨乱亚洲 | 9久9久女女热精品视频免费观看 | 玖玖色视频 | 男人天堂网址 | 午夜三级a三级三点在线观看 | 黄色毛片视频校园交易 | 精品久久久久久久久久久久久久久 | 久久综合精品国产一区二区三区 | 大狠狠大臿蕉香蕉大视频 | 作爱视频在线免费观看 | 狠狠色丁香婷婷综合 | 国产高清视频免费 | 久视频在线观看 | 欧美一级成人一区二区三区 | 99久久99久久精品免费看子 | 免费观看性欧美毛片 | 国产精品人伦久久 | 国产一级免费 | 一级毛片牲交大片 | mm在线精品视频 | 国产成人一区免费观看 | 成人a一级毛片免费看 | 最新国产精品视频免费看 | 毛片网站在线 | 亚洲国产片在线观看 | a级毛片在线观看 | 欧美成人毛片一级在线 | 男人扒开腿躁女人j | 久草精品免费 | 欧美一级大片在线观看 | 日韩中文精品亚洲第三区 | 亚洲视频欧美 | 国产欧美自拍视频 |