Analysts: Expectations for higher interest rate weakens

17:11, April 13, 2010      

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According to the latest data released by the People's Bank of China, both credit and M2 (broad money supply) growth slowed down in March. Analysts pointed out that with the central bank's strengthening withdrawal measures, CPI growth rate may drop slightly in March.

The possibilities of raising interest rate and deposit reserve ratio was narrowing, analysts say.

By the end of March, M2 was 22.5 percent higher year on year. The growth rate was 3.03 percentage points lower than the previous month.

Analysts believe that the possibility that the central bank will raise interest rat was low, considering from falling M2 growth rate.

New yuan-dominated loans reached 2.6 trillion yuan in the first quarter, accounting for 34.7 percent of the banking authorities' annual plan.

It is reported that the banking regulators have earlier set a lending target of 7.5 trillion yuan for 2010, and required the commercial banks to extend 30 percent of loans in each of the first two quarters and 20 percent in each of the remaining two. The loans released in Q1 have exceeded the “red line.”

However, E Yongjian, a researcher from Bank of Communications pointed out that credit expansion in the first quarter is not high, considering larger-scale credit demand at the beginning of a year, and the credit support needed for the drought-hit area in Yunnan Province.

The statistic showed that the central bank withdrew 602 billion yuan of funds in March. The central bank restarted issuing the 3-year central bank notes which had stopped issuing for 22 months last Wednesday.

"This largely reduced the probabilities of raising reserve ratio, and helps to relieve market concerns," analysts pointed out.

Quantity monetary instruments would be the basis of the roadmap for PBOC’s monetary policy in Q2, some experts noted.

By People's Daily Online


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