PBOC may need to adjust monetary policy after last week’s scare

China may adjust monetary policy as needed while seeking more efficient use of the nation’s financial resources as a cash squeeze in the banking system risks exacerbating an economic slowdown.

The People’s Bank of China said the nation should “appropriately fine-tune” its policies, according to a statement on its website yesterday that summarized the monetary policy committee’s second-quarter meeting in Beijing. It was the first time since September that the panel, led by Governor Zhou Xiaochuan, has used the “fine-tune” phrase, suggesting officials are more open to loosening policies.

The comments follow an easing of the cash crunch on June 21 after the seven-day repurchase rate, a gauge of interbank funding availability, rose to the highest since at least 2003. Slowing growth in the world’s second-largest economy, a crackdown on illegal capital inflows and efforts to rein in shadow banking have contributed to increased borrowing costs.

The PBOC, which didn’t elaborate on the fine-tuning or reference this month’s developments in its statement, reiterated that it will implement a “prudent” monetary policy, a label in place since 2010.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu