The Currency Situation is Now Dubious to Tighten
Experts say that inflation concerns will not have a major impact on policy. Experts said on Monday that even though the U.S. Central bank’s dovish attitude towards its ultra-loose monetary policy has increased inflation concerns. currency policymakers are still unlikely to tighten China’s monetary policy.
As the producer price index rose from 4.4% in March to 6.8% year-on-year. The strong rise in China’s producer prices in April made monetary policy the focus of attention. As global concerns about inflation intensify, the central bank may tighten monetary policy.
However, experts believe that a high PPI inflation rate will not be an attractive factor that causes the People’s Bank of China to raise interest rates or restrict credit growth. Chief Executive Wu Ge said that if Chinese policymakers are facing inflationary pressure. It may be triggered by global factors, mainly imported from overseas. These factors include demand stimulus in major developed economies and the continued existence of new coronavirus cases. The resulting shortage of raw materials. Economist of Changjiang Securities.
Data released last week showed that the annual rate of consumer prices in the United States increased by 4.2% in April
The largest increase since 2008, adding to concerns about the overheating of the U.S. economy.
The unexpected spike in inflation occurred before the Fed’s next policy meeting on Wednesday. Investors expected more hints from the Fed’s monetary policy.
So far, the Fed has reiterated that the increase in inflation is only a temporary phenomenon. Fed Chairman Jerome Powell said that withdrawing any currency support is still “a long way”.
The United States’ strong growth results and loose monetary policy make it more likely that the inflation rate will rise again. Analysts said that “inflation overspending” is one of the biggest downside risks facing the global economic outlook in the coming months.
Economists at Morgan Stanley, an American investment company. Predict that the Fed will announce its intention to reduce asset purchases at the September meeting. Formally announce it in March next year, and start the reduction in April 2022. They expect the Fed to start raising interest rates in the third quarter. For a period of time in 2023, the inflation rate has been maintained at 2% or above. Furthermore, the labor market has reached the maximum employment rate.
The National Bureau of Statistics said on Monday that although China’s industrial production continued to maintain steady growth in China. Some economic activity indicators in April showed a slowdown in growth especially in fixed asset investment and household consumption.
Beijing may temporarily not tighten monetary policy and observe the pace of recovery.
Zhang Zhiwei, chief economist of Pinpoint Asset Management, said that the possibility of the People’s Bank of China raising interest rates or normalizing monetary policy has declined.
Louis Kuys, head of the Asian Economics Department of the Oxford Economics Institute, said that trying to prevent the weakening of domestic demand momentum will cause difficulties for policy makers, because it will lead to pressure to implement more pro-growth macro policies, such macro policies. May increase financial risks and leverage. British think tank.
Economists say that any interest rate hike or tightening of China’s financial conditions will increase borrowing costs and put pressure on corporate confidence.