PBOC Governor Emphasizes Interest Reform
The Chinese central bank governor vowed to further deepen market-based interest rate reforms, saying China should adjust the policy rate to comply with economic principles, the need for macroeconomic management and cross-cycle policy design.
"Now China's real interest rate is slightly lower than its economic growth rate and is at a relatively reasonable level." Yi Gang, governor of the People's Bank of China, wrote in an article for the Journal of Financial Research.
Yi mentioned the one-year benchmark deposit rate is now at 1.5 percent, and financial institutions could either add or subtract basis points from the benchmark to set their own deposit rates. "This is kind of a 'golden-rule level', which meets the need of cross-cycle policy design."
"If the deposit rate is needed to float downward in the future, it could be decided by market entities."
The governor said central banks should avoid implementing the asset purchase tool for too long, for it will cause many problems.
"If it must be implemented, central banks should adhere to three principles: aiming to help the market back to normal, moving ahead of the market as much as possible and reducing the scale and duration of asset purchases as much as possible."
Yi stressed at present, China has the conditions to implement a normal monetary policy for a longer period, and there is no need to implement asset purchase operations right now.
The PBOC will further deepen market-based interest rate reform, improve the formation and transmission mechanism of market-based interest rates, promote the central bank policy rate system and strengthen the cultivation of market benchmark interest rates, according to the article.
First, please LoginComment After ~