MNI BRIEF: China's CENBANK Says Prudent Policy To Guide Next Steps

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.