PBoC looks cautious in light of inflation risks – UOB
Economist at UOB Group Ho Woei Chen, CFA, reviews the latest Monetary Policy Report by the PBoC.
Key Takeaways
“People’s Bank of China’s (PBoC) 2Q22 Monetary Policy Implementation Report released on Wed (10 Aug) said that its monetary policy continues to be focused on maintaining stability in the economy and the broader market.”
“There is an emphasis on using targeted tools including the relending programmes and guiding banks to increase credit rather than large reductions to the banks’ RRR or the MLF, coming against a backdrop of flushed domestic banking liquidity, increasing caution over domestic inflation and tightening monetary policy at global central banks.”
“The PBoC said China should be alert to structural inflation pressure which may increase in the short term. As we noted earlier, this may limit its scope to cut interest rates in 2H22 even as it said that recovery in domestic economic foundation has yet to stabilise.”
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