Central Banks
China’s Rapid Covid Reopening Tests PBOC’s Easing Path
- Economists debate timing of interest rate and RRR cuts
- PBOC has bigger policy room as Fed hikes slow, yuan rises
The People's Bank of China building in Beijing.
Source: Bloomberg
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The calculus behind the People’s Bank of China’s pledge to use monetary policy to bolster the economy has been altered by the faster-than-expected recovery following the scrapping of Covid restrictions.
The rapid rebound in consumption and services following the sudden ditching of Covid Zero in December has left some economists questioning the need for more stimulus. However, sectors including property, durable goods, manufacturing and exports remain weak, meaning the PBOC may still see a need to follow through on its vow last month to stabilize growth and support domestic demand, with some still expecting a cut to either the required reserve ratio or interest rates.