MNI BRIEF: PBOC Should Cut Rates Moderately In H2: Former Official

China's monetary policy should remain stable with a tilt to looser in the second half of the year, moderately cutting interest rates, so to take precautions against a possible economic slowdown and U.S. rate hikes, wrote Sheng Songcheng, a former director of the People's Bank of China's statistics department in a blog post.

A reasonable and moderate interest rate cut would help reserve future policy room for future interest rate hikes when the Federal Reserve tightens its monetary policy, said Sheng.

As well, a moderate cut could ease flows of short-term speculative funds flowing into China that are pushing up the yuan, said Sheng, adding that it will also help stabilize China's exports in H2.

China may still achieve high growth of 8% in Q2 before slowing to 5-6% in H2, said Sheng, calling for an active monetary response to promote comprehensive economic recovery as fiscal expansion is weaker than last year. Moderate inflationary pressure in the short-term as well as relatively stable asset prices provide the right conditions, Sheng added.