PBOC Says Impact of Potential Rate Hikes by U.S. and Others Will Be Smaller Than in the Past

China's central bank, the People's Bank of China (PBOC), stated regarding the possibility of benchmark interest rate hikes by major economies such as the United States and Japan that "the adjustment magnitude of monetary policy is relatively soft, and the impact may be smaller than in the past."

The PBOC made the assessment in its second-quarter monetary policy execution report released on its website on the 12th, local time.

In June, the European Union (EU) and Japan raised their benchmark interest rates, while the U.S. Federal Reserve (Fed) kept rates on hold while issuing hawkish messages emphasizing price stability.

The U.S. Fed also froze rates in July, but calls for tightening grew louder as three committee members advocated for a 0.25 percentage-point hike.

The PBOC cited rising international oil and commodity prices driven by the war in Iran as factors affecting inflation.

It further analyzed that the artificial intelligence (AI) investment boom has increased demand in related industries, leading to rising prices for products such as semiconductors and electricity, while also mentioning U.S. tariff hikes as one of the factors behind inflation.

The PBOC noted that circumstances vary across countries, leading to differences in national monetary policies, and projected that this monetary policy adjustment would be relatively moderate.

In doing so, it pointed out that the energy shock stemming from the war in Iran is easing, assessing that this round of monetary policy adjustment does not represent a drastic shift in macroeconomic policy.

It explained that while past instances of rapid tightening following large-scale accommodative monetary policies had clear repercussions on the market, this rate hike is more related to liquidity changes rather than a shift in policy direction.

At the same time, the PBOC stated, "We must pay attention to the uncertainties regarding how these rate hikes will impact global financial markets," mentioning the burden of rising government bond yields and the possibility of downward corrections in liquidity-driven stock markets.

Regarding China's monetary policy, the PBOC stated, "We will continue to well implement an appropriately accommodative monetary policy," adding, "We will comprehensively utilize monetary policy tools and make timely adjustments to maintain sufficient liquidity."

Previously, the Chinese Communist Party set its policy stance for the second half of the year during a Political Bureau meeting of the CPC Central Committee on the 30th of last month, calling for "a more proactive fiscal policy and an appropriately accommodative monetary policy," and the PBOC has repeatedly emphasized that it will maintain ample liquidity.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.