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The Peoples Bank of China has committed to keep a prudent monetary policy stance this year, continuing to fine-tune monetary conditions with targeted policy measures. Deleveraging continues to be a main priority for Chinas policymakers, while increased attention would be given to managing financial risks related to non-performing assets and high corporate leverage, bond defaults, shadow banking and the heated real estate market.
The Chinese central bank is likely to tighten monetary conditions a bit through the course of this year by hiking interest rates on its open-market operations, according to a Scotiabank research report. The seven-day reverse repo rate is currently at 2.45 percent following a 10-basis point hike in February and March.
However, the official benchmark rates are unlikely to be changed. The one-year loan and deposit rates have been maintained at 4.35 percent and 1.5 percent respectively, since October 2015. Chinas consumer price inflation continues to be low. Consumer price inflation accelerated 0.9 percent year-on-year in March.
We expect price gains to accelerate gradually over the coming months, with inflation closing 2017 at 2.2 percent y/y, added Scotiabank.
