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PBoC’s Zhou: Room to ease monetary policy further - Rabobank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 26, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Michael Every, Head of Financial Markets at Rabobank, notes that in Asia today markets have started out on firm footing on the "surprising" development that PBoC Governor Zhou Xiaochuan has made further comments suggesting he has room to ease monetary policy further.

    Key Quotes

    “In exact terms he said "Monetary policy is now prudent and relatively accommodative. We still need to closely monitor developments and make adjustments as appropriate. China still has some monetary policy space and multiple policy instruments to address possible downside risks."

    Why this should be so positive eludes me. Firstly, what else is a central banker supposed to say? That policy is currently inappropriate? Secondly, the fact that the PBoC has room to cut rates further is hardly a surprise. Almost everyone in the market has further rate cuts and RRR cuts pencilled in at this stage. Perhaps it was because Zhou also stated that there is "no basis for sustained CNY depreciation"? (Again.) In which case the market might have to ask itself how cutting rates as US data lean back towards the Fed carefully raising them argues for CNY stability - because it doesn't.”
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