July 23, 2019 / 10:27 AM / 5 months ago

PBOC chief says current interest rate level is appropriate - Caixin

BEIJING (Reuters) - China’s central bank governor Yi Gang said the country’s current interest rate level is appropriate, the financial magazine Caixin reported on Tuesday.

FILE PHOTO: Governor of the People's Bank of China Yi Gang attends a thematic forum of the second Belt and Road Forum for international cooperation in Beijing, China, April 25, 2019. REUTERS/Jason Lee/File Photo

Chinese policymakers are keen to fend off a sharper slowdown in the world’s second-largest economy that has been pinched by a bruising trade war with the United States.

Yi said in a recent interview with Caixin that whether the People’s Bank of China (PBOC) follows the Federal Reserve in cutting interest rates will depend on China’s own economic conditions.

“Overall, our current interest rate level is appropriate,” Yi said. “Cutting interest rate will mainly deal with the danger of deflation, but price changes in China remain moderate.”

Yi did not clarify which interest rate he was referring to.

The PBOC has kept the benchmark lending rate unchanged since October 2015.

China is keeping all its economic policy tools within reach as the trade war with the United States gets longer and costlier, but still sees more aggressive action like interest rate cuts as a last resort should the dispute get uglier, policy sources have told Reuters.

China will keep its benchmark deposit rate for a relatively long time, but will phase out its benchmark lending rate in the push to unify the benchmark lending rate and market-based rates.

Any rate cut by China will aim to cope with deflation risk, Yi was quoted as saying.

The PBOC has pledged to gradually unify two interest rate “tracks” - its market-based rates that have been developed in recent years and its benchmark rates - but it has never given a timetable for the plan.

Reporting by Beijing Monitoring Desk, Stella Qiu and Kevin Yao; Editing by Jacqueline Wong

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