People’s Bank of China governor Zhou Xiaochuan said that the government will not resort to massive stimulus measures easily, dashing the hopes of some economists and investors for aggressive measures to boost growth such as a broad cut in the deposit reserve ratio.
Zhou made the comment at a forum over the weekend when asked about the possibility of a cut in the banks deposit reserve requirement, sina.com reported.
Zhou said there are some changes in the economy but the government will be cautious about drawing any conclusions. He also said that short-term economic data changes may not accurately indicate the trend of the economy.
“Looking at current economic conditions, the State Council has highlighted the need to hold policy steady. So we won’t undertake any ‘major stimulus’ easily,” said Zhou.
Data released by the National Bureau of Statistics on Friday showed that China’s headline inflation in April was lower than expected. CPI rose 1.8% y/y as against expectations of +2.0%, marking the lowest level since October 2012. PPI fell for the 26th straight month, down 2.0% y/y compared with the expected -1.9% y/y.
The disappointing data renewed speculation about monetary policy loosening, especially a broad cut in the reserve ratio.
“The central bank has always been making counter-cyclical adjustments…Most of our adjustment is fine tuning. We have always been fine tuning policies. Whether you see it or not, we have long been doing it,” Zhou said.
The governor said that policy fine tuning is mainly adjusting liquidity and traditional quantitative policy tools are only used when stronger measures are needed.
The benchmark seven-day repo rate has remained steady at the 3% level, below the 4% the central bank has indicated it is comfortable with.