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Economist Ho Woei Chen, CFA, and Rates Strategist Victor Young at UOB Group assessed the recent monetary policy report by the PBoC.

Key Quotes

“In the 3Q Monetary Policy Report dated 15 November, the People’s Bank of China (PBoC) said that downside risk to the economy and challenges have increased amid complicated domestic and external developments. While PBoC maintains its prudent monetary policy stance, it said that it will strengthen counter cyclical adjustments and improve the monetary policy transmission through reforms and push for greater adoption of the Loan Prime Rate (LPR) by the banks in order to reduce real interest rates”.

“The focus is also on preventing the spread of higher inflation expectation. This highlights the constraints in easing monetary policy as food inflation has surged on the back of the jump in pork prices. The headline CPI has risen to more than 7-year high at 3.8% y/y in October though the core CPI (excluding food and energy) had remained subdued at 1.5% y/y”.

“The central bank reiterated that there will not be “flood-like” stimulus despite slower growth”.