PBOC: Our Big Easing Nothing Like ECB’s, Fed’s QE

China’s central bank has insisted its latest double shot of easing differed from the quantitative easing (QE) strategy pursued by foreign central banks, according to a statement released early Monday, adding that the cut in interest rates and reserve requirement ratios were “conventional and normal monetary policy measures.”

On Friday the People’s Bank of China (PBOC) announced a quarter-point cut in benchmark interest rates, as well as a reduction in the amount of deposits banks were required to hold in reserve by 50 basis points, a week after official data showed the third-quarter growth of the world’s second-biggest economy was at its slowest since the global financial crisis.

Friday’s moves marked the sixth interest-rate cut since November 2014 and the fourth reserve requirements reduction, as authorities attempt to resuscitate a faltering economy.

Explaining the move, the PBOC wrote on its website on Monday that the late-evening moves on Friday were “reasonable and fully expected” given China’s feeble consumer prices and declining funds outstanding for foreign exchange held by Chinese financial institutions.

“The cooling inflation in September means that an appropriate reduction in the nominal interest rate is needed to allow real interest rate to return to a reasonable level, allow social financing costs to fall further and amplify the financial support for the economy,” the PBOC said in the statement.


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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.