PBOC may need to adjust monetary policy after last week’s scare

China may adjust monetary policy as needed while seeking more efficient use of the nation’s financial resources as a cash squeeze in the banking system risks exacerbating an economic slowdown.

The People’s Bank of China said the nation should “appropriately fine-tune” its policies, according to a statement on its website yesterday that summarized the monetary policy committee’s second-quarter meeting in Beijing. It was the first time since September that the panel, led by Governor Zhou Xiaochuan, has used the “fine-tune” phrase, suggesting officials are more open to loosening policies.

The comments follow an easing of the cash crunch on June 21 after the seven-day repurchase rate, a gauge of interbank funding availability, rose to the highest since at least 2003. Slowing growth in the world’s second-largest economy, a crackdown on illegal capital inflows and efforts to rein in shadow banking have contributed to increased borrowing costs.

The PBOC, which didn’t elaborate on the fine-tuning or reference this month’s developments in its statement, reiterated that it will implement a “prudent” monetary policy, a label in place since 2010.

Bloomberg

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