China’s central bank said it’s closely monitoring domestic and external risks to the economy and that the complexity of the situation shouldn’t be underestimated.
The People’s Bank of China cited market volatility spurred by the U.K.’s decision to leave the European Union, according to a statement released late Monday after a quarterly monetary policy committee meeting. Domestic economic and financial performance remains stable overall, the advisory panel led by PBOC Governor Zhou Xiaochuan said.
The central bank, which has kept its main interest rate at a record low since October, was more upbeat on the U.S. economy, which it said is "recovering moderately." The PBOC repeated that risks in global financial markets have risen and that it will maintain prudent monetary policy and keep the yuan stable at a reasonable level.
The statement "highlighted the uncertainties in external economies and rising risks in international financial markets," and shows the PBOC remains open to cutting the benchmark interest rate or required reserve ratio for big banks to counter headwinds, Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong, wrote in a report after the release. Zhao forecasts one rate cut and three RRR cuts this year.
— With assistance by Yinan Zhao