China central bank: liberalizing rates key element of financial reform

Probably a bit of both.

On Wall Street, S&P 500 Index.SPX rose 1.1 percent to turn positive on the year, while the tech-heavy Nasdaq jumped 2.3 percent.IXIC. “In future, we will proceed to lower the RRR at a normal pace”, he said. Last week, the head of the European Central Bank suggested it might extend its $1.2 trillion bond purchase program or take other measures to stimulate the Eurozone’s economy.

There’s no doubt about it: China’s economy is on rocky ground.

Despite a recovery in global equity prices, oil prices were softer, pressured by concern about oversupply.

Gross domestic product (GDP) in the world’s second- largest economy grew at just 6.9 per cent in the third quarter, its slowest rate in six years. Chinese regulators have removed the loan rate floor in 2013, and allowed banks to issue certificate of deposits at negotiated interest rates.

The event will see China’s central committee – a body comprising 376 of the nation’s most powerful communist party figures – discuss the CPC’s 13th five-year plan, something that outlines the economic and social agenda for the nation over the next five years.

Looking forward, further monetary easing can help to reduce debt service burdens and improve corporate cash flows, but will be of limited use in supporting growth unless combined with fiscal measures and structural reforms. The dollar has managed to give back a few of the gains seen in the wake of the ECB’s dovish guidance and China’s rate cut with the prudent investor preferring to book a few profit on the dollar’s recent advances ahead of the FOMC meet.

It may do that. The 6.9% rate was the lowest since the 6.2% achieved in the first three months of 2009 when the global economy was in recession. And the Bank of Japan is forecast to add to its stimulus.

The yuan largely held steady on Monday even though the dollar index had risen sharply on Thursday and Friday.

This was the fifth RRR reduction in almost nine months and the sixth round of interest cuts in almost 11 months, amid efforts to further reduce the cost of financing and ensure reasonably adequate liquidity in the banking system. For the RBA, though, a key issue will be inflation. “This will facilitate the transition of policy adjustments from quantitative to price-based”, the PBOC said.

At the moment, market pricing on a rate cut next month is 50/50.

Probably not at this stage.

It was expected to do it in September but didn’t.

China could pledge more reforms for state-owned enterprises to free up resources for private enterprises.

“We have never said that we should defend to the death any goal, but that the economy should operate within a reasonable range”, the central government paraphrased Li as saying in a statement released on its website.

Slower trade is the primary reason, with the Chinese slowdown a major driver.

“We saw the Aussie surged right after the PBoC announcement”.

“Normally when a large country cuts their interest rates the currency falls”, he said.