The People’s Bank of China (PBOC) has decided to leave the interest rate unchanged, despite data pointing to a slowdown in the Chinese economy. According to analysts, the decision to leave the key interest rate unchanged may reflect concerns about capital outflows.
The PBOC left the one-year medium-term loan rate unchanged at 2.85%, having not raised its policy rate since January this year. Moreover, it is using new instruments, such as lowering the reserve requirement ratio (RRR) of commercial banks, to support the corporate sector on a sector-by-sector basis.
Meanwhile, Cheng Songzhen, former head of the People’s Bank of China’s statistics bureau, said that lowering the RRR will help the People’s Bank of China manage risks as the Federal Reserve begins to adjust its monetary policy and will help ease downward pressure on the yuan.