China’s Surprise Rate Inaction Missed an Opportunity

When China was busy leapfrogging incumbent industrial giants in the first years of this century, the Federal Reserve was increasingly worried about a very different challenge, one that presently confronts Beijing: deflation. Significant efforts by the Fed went into heading off such a troubling development in the US. China could learn a trick or two.

In holding a key interest rate on Monday, the People’s Bank of China delivered more than a surprise: The bank missed an opportunity to set a narrative at the start of what's likely to be another tough year. Long feted for its rapid economic development the past four decades, China is now wrestling with an economy that is underperforming. Consumer prices have been flat or declining for months. Authorities appear at a loss to turn the situation around, assuming they want to.