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PBOC Messaging Inside and Out

The PBOC’s indirect disclosure of discussions with banks concerning pre-holiday liquidity management provided more transparency into central bank thinking about money market conditions, the use of monetary policy tools, and the central bank’s communications with market participants. Most compelling is the PBOC’s admission of its own surprise at tightening money market conditions, in contrast to typical public Chinese bureaucratic claims of near-omniscience.

Capital outflows have further complicated the PBOC’s efforts to maintain interbank market stability during a pre-Chinese New Year period which is always difficult for liquidity management. However, the central bank also has new tools at its disposal to limit volatility in interbank rates, and this year’s injections of liquidity via open market operations and other monetary policy tools are still roughly in line with levels in previous years (so far).

Posted August 1, 2017
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