Chinese Rate Cut Statement Reveals Little

December 23, 2008

A statement on the PBOC web site merely details the further easing of monetary policy announced yesterday without explaining why the actions were taken. But such was the fifth rate cut following moves on September 15, October 8, October 29, and November 26. And a recent round of monthly indicators points to a much more pronounced slowdown of growth that heretofore anticipated. The most startling examples were in export growth, a drop of 2.2% in the year to November from an on-year rise of 21.5% in October, and industrial production, a rise of 5.4% after on-year gains of 8.2% in October and 16% at mid-2008. Chinese inflation has also receded sharply. The CPI rose 2.4% y/y in November, down from 4.0% in October, and PPI inflation slowed to 2.0% from 6.6% the month before. More cuts in interest rates and reserve requirements will be made early in 2009, and other steps are under consideration to backstop consumption and housing.



Comments are closed.