Experts predict interest rate cuts
8 October 2008
Several economists and securities experts expect the People's Bank of China (PBOC) to reduce interest rates in order to support steady economic growth and boost the flagging property market, state media reported. The central bank auctioned US$11.7 billion in one-year bills yesterday at a yield 10 basis points below market forecasts, which was interpreted as a sign that it is ready for a rate cut. "Against the backdrop of weak external demand and a sluggish home consumer market, the risk of an economic downturn is rising and an interest rate cut would not surprise," said Li Huiyong of Shenyin & Wanguo Securities. "[If] the central bank does not adjust the rate in time, it will do great harm to the economy," said Song Guoqing, a professor at Peking University's China Center for Economic Research. Jing Ulrich, China equities chief at J.P. Morgan, told Bloomberg that "expectations are building" for policies that will help lower-income home buyers and ease credit for developers.