More Bankers Predict Monetary Policy Easing as Economy Cools, PBOC Says

More Chinese bankers are forecasting a further loosening in monetary policy as economic growth slows, and inflation expectations of households are easing, surveys by the central bank showed.

The percentage of bankers who said the economic environment is “relatively cold” doubled to 23.6 percent this quarter from the previous three months, while a gauge measuring the “hotness” of the economy fell below 50 percent for the first time in two years, according to a People’s Bank of China statement on its website today. A separate survey of entrepreneurs showed their confidence slipped, it said.

The central bank cut the amount of cash that lenders must set aside as reserves for the first time since 2008 this month as Europe’s debt crisis dimmed the outlook for exports and growth. Inflation eased to the lowest in 14 months in November, and the nation’s top policy makers said last week the government will target “basically stable” consumer prices next year and “unswervingly” implement real-estate curbs.

“The decline in inflation expectations and in entrepreneurs’ confidence will make it easier to loosen monetary policy,” said Dariusz Kowalczyk, a senior economist at Credit Agricole CIB in Hong Kong. “We expect a reserve-requirement-ratio cut soon, possibly still in December or before the Lunar New Year in January.”

About 14.4 percent of bankers expect more monetary policy easing, compared with 3.5 percent in last quarter’s survey. About 56 percent predict the current policy bias will be maintained, while the rest foresee a tightening, the central bank said.

‘Coming Down’

Among households, 36.8 percent forecast prices will rise in the next three months, compared with almost half in the previous survey. Consumer prices rose 4.2 percent last month from a year earlier, after climbing 5.5 percent in October, the statistics bureau said Dec. 9.

“Inflation is coming down and that’s good news for the government because the inflation-growth dilemma is not as prominent,” Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong, said before the report. He estimates price gains will slow to below 3 percent by the middle of 2012.

The proportion of households who plan to buy property next quarter fell 0.3 percentage point to 13.9 percent from the previous three months, and is near the lowest level since the inception of the survey, the central bank said. About 72.9 percent of households found property prices “too high and unacceptable,” down 2.8 percentage points from the previous survey.

“The wait-and-see attitudes are prevailing in the property market and the property curbs are showing effects,” the central bank said.

The central bank’s quarterly surveys are based on interviews with officials from 3,000 banks in China and 20,000 urban households in 50 cities.

--Victoria Ruan, Lifei Zheng, with assistance from Li Yanping. Editors: Shamim Adam, Stephanie Phang

To contact Bloomberg news staff for this story: Victoria Ruan in Beijing at Vruan1@bloomberg.net; Zheng Lifei in Beijing at lzheng32@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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