PBOC Stays on Hold After Fed in Sign Easing Is Limited for Now

(Bloomberg) -- China’s central bank refrained from immediately following the U.S. Federal Reserve in cutting borrowing costs, signaling its preference to continue with the current targeted easing approach for now.

The People’s Bank of China skipped open market operations on Thursday, which by default keeps 7-day borrowing costs unchanged at 2.55%. The PBOC hasn’t mirrored a Fed move since early 2018, when the growth trajectory of the world’s two largest economies started to diverge. It last cut it in 2015.

The Fed reduced borrowing costs for the first time in more than a decade at their two-day meeting in Washington this week, laying the path for central banks in emerging market economies such as China to follow suit. While economists expect the PBOC to lower the cost of the 7-day reverse repo by the end of September, the timing depends on how the domestic economy is going.

China’s top leadership has signaled they’re reluctant to roll out major stimulus measures, instead focusing on reforms and targeted policies such as corporate tax cuts.

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger

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With assistance from Bloomberg