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Monetary policy stability will guide the People's Bank of China in the second half of this year based on domestic inflation and the overall economic situation with a possible tightening move by the US Federal Reserve ahead not a main factor, said Sun Guofeng, head of the central bank's monetary policy department, at a briefing on Tuesday.
A surprise 50 bps cut for all banks in the cash reserve requirement ratio last week was outlined as a regular monetary policy operation after conditions returned to the pre-pandemic norms in H1, and did not alter a prudential policy stance, said Sun, giving no details when asked if there will be more cuts in the cash ratio, or other rates, coming.
On the Fed, Sun said a possible monetary tightening would have limited impact on China's financial markets, but the PBOC in any event would chart its own course with a focus on money supply, and social spending in line with nominal GDP growth, while consolidating a decline in lending interest rates, and promoting lower finance costs.
On the inflation front, producer price gains are expected to slow in Q4 and 2022 after remaining at a high level in Q2 and Q3, said Sun, adding that inflation is under control with the economy moving forward steadily.