MNI BRIEF:Rate Hikes A Threat To Financial Stability-PBOC Xuan

Risks exposed by a few banking institutions in the U.S and Europe showed the rapid shift in monetary policy in major economies is generating spillover effects, said Xuan Changneng, deputy governor of the People's Bank of China on Saturday at the Global Asset Management Forum.

" It is still uncertain whether inflation in major developed economies could significantly fall in the short term. Maintaining high interest rates may have negative effects on the stability of the financial system, which increases the dilemma faced by monetary policy makers," he said, adding Silicon Valley Bank's balance sheet characteristics made it more sensitive to interest rates changes and ultimately led to risk. The collapse of the SVB and its impacts are still developing.

The PBOC has managed to maintain a tepid inflation environment as the average growth of CPI was 2% in the past five years with stable interest rates and a flexible yuan exchange rate. Therefore, the safe haven appeal of China’s financial assets have been increasingly highlighted, he said.