CHINA HAS ROOM TO CUT INTEREST RATES ON LOW INFLATION
Li Yanping
Bloomberg, March 28, 2009
China has room to cut interest rates as consumer prices may end the year unchanged, the central bank said after inflation fell in February for the first time since 2002.
“The central bank still sees room for more rate cuts,” Zhang Jianhua, the research head of the People’s Bank of China, told an economic forum in Beijing today. “We haven’t yet cut rates because money market rates have dropped to quite low levels and banks have abundant liquidity.”
China’s consumer price index may stand at zero for 2009 and the nation may escape deflation because of “strong loan growth” and the government’s 4 trillion yuan ($585 billion) stimulus package to spark an economic recovery, Zhang said.
Plunging prices have increased the risk that deflation will become entrenched, prompting consumers to delay purchases, squeezing company margins and triggering wage cuts. Premier Wen Jiabao, who this month set a 4 percent inflation target for 2009, is relying on a surge in lending and the support measures to spark an economic recovery.
Wen said March 13 the nation’s 8 percent growth target for this year is “difficult but possible” to achieve. People’s Bank of China Governor Zhou Xiaochuan said this week that leading indicators are pointing to an economic recovery.
Li Yanping
Bloomberg, March 28, 2009
China has room to cut interest rates as consumer prices may end the year unchanged, the central bank said after inflation fell in February for the first time since 2002.
“The central bank still sees room for more rate cuts,” Zhang Jianhua, the research head of the People’s Bank of China, told an economic forum in Beijing today. “We haven’t yet cut rates because money market rates have dropped to quite low levels and banks have abundant liquidity.”
China’s consumer price index may stand at zero for 2009 and the nation may escape deflation because of “strong loan growth” and the government’s 4 trillion yuan ($585 billion) stimulus package to spark an economic recovery, Zhang said.
Plunging prices have increased the risk that deflation will become entrenched, prompting consumers to delay purchases, squeezing company margins and triggering wage cuts. Premier Wen Jiabao, who this month set a 4 percent inflation target for 2009, is relying on a surge in lending and the support measures to spark an economic recovery.
Wen said March 13 the nation’s 8 percent growth target for this year is “difficult but possible” to achieve. People’s Bank of China Governor Zhou Xiaochuan said this week that leading indicators are pointing to an economic recovery.
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