The monetary policy committee of the People’s Bank of China (PBC) advised to strengthen monetary policy regulation, including reductions in the reserve requirement ratio (RRR) and cutting interest rates at an appropriate time during a recent meeting to discuss priorities for the upcoming phase of the country’s monetary policy, according to a release by China’s central bank.
In the face of intensifying adverse effects resulting from changes in the current external environment, the committee recommended efforts to strengthen monetary policy adjustments with a more forward-looking, targeted, and effective approach, according to the release of the fourth-quarter meeting of the PBC’s monetary policy committee, held on December 27.
During this regular monetary policy meeting, the committee reiterated the importance of maintaining stability in foreign exchange market expectations and commitment to mitigating risks associated with excessive exchange rate fluctuations.
The meeting proposed bolstering the resilience of the foreign exchange market, ensuring stable market expectations, and proactively preventing excessive exchange rate fluctuations, and maintaining the basic stability of the yuan exchange rate at a reasonable and balanced level, according to the PBC release.
There is ample room for the PBC to cut the RRR in 2025, and there is also some space for interest rate cuts, which allows for appropriate adjustments based on the international monetary policy environment, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Saturday.
The meeting aligned with the statement that a moderately loose monetary policy should be implemented, including reductions in the RRR and interest rates at appropriate times to ensure ample liquidity, as noted at the Central Economic Work Conference held from December 11 to 12, 2024, in Beijing.
The PBC monetary policy committee meeting also emphasized the significance to enhance the coordination between monetary and fiscal policies and maintain stable economic growth and overall price stability, according to the PBC release.
The effective coordination of financial policy, fiscal policy, and structural guidance is expected to maintain overall price stability and maintain consumers’ confidence, Dong said.
GT
