MNI PBOC WATCH: Data-Dependent, No Hints Of Future Stimulus

The People’s Bank of China remains committed to a moderately accommodative stance, and any policy adjustment will be data-based, Governor Pan Gongsheng told reporters on Monday, in comments which provided few clues as to any future easing.

With economic indicators pointing to stronger economic headwinds, investors had anticipated that Monday’s joint press conference held by the PBOC and financial market regulators might provide hints to upcoming stimulus, after a similar event last year was used to announce measures aimed at buoying the stock market. Investors’ attention will now turn to the Politburo meeting later this month. 

Pan spoke after the Loan Prime Rate remained unchanged at 3.0% for the one-year maturity and 3.5% for five years and over earlier on Monday. Both rates last fell in May, easing by 10 basis points, after the PBOC lowered its benchmark seven-day reverse repo rate by 10bp to 1.4% on May 8 and reduced banks’ reserve requirement ratio by 50bp on May 15.(See MNI PBOC WATCH: Sept LPR To Hold, Easing Seen On Econ Slowdown)

Treasury futures closed higher, with the 30-year benchmark contract up 0.22% at CNY115.130 and the 10-year benchmark contract up 0.20% at CNY107.975.

The governor’s remarks focussed on the achievements of China’s monetary policy and exchange rate frameworks since 2021. He said the PBOC had concentrated on defusing key risks from local government funding vehicles, the real estate market and small and medium-sized banks, and stressed efforts to promote the yuan’s internationalisation “at a steady pace”. (See MNI: China Bad Bank Calls Grow As Debt Overhang Saps Growth)

Pan also highlighted the PBOC’s revamping of its monetary policy tools. 

Last Friday, the Bank announced that it will conduct 14-day reverse repo operations with fixed volumes through interest-rate bidding, with winning bids determined at multiple price levels. This will align it more closely with the Medium-term Lending Facility (MLF) and outright reverse repos, reinforcing the seven-day reverse repo rate’s role as the pricing anchor for money market and bond market interest rates.