The People’s Bank of China has skipped open market operations for a record 22 straight trading days, raising major market concerns about liquidity, The Paper said.
Ping An Securities believes that this does not mean that monetary policy is tightening. Since the second quarter of this year, the central bank has been trying to release medium- or long-term liquidity mainly through targeted reserve requirement ratio cuts and one-year medium-term lending facility operations.
Short-term liquidity was released mainly to alleviate pressure during the taxation period and local government debt issuance, Ping An said. It has also been significantly loose since the second half of the year.
However, given that the growth rate of total social financing continues to decline, and the liquidity released has failed to flow into the real economy, the market is concerned that the PBOC may cut interest rates for the year ahead.
Jiang Chao, chief economist at Haitong Securities, says if trade friction causes a sharp decline in exports, which in turn affects domestic employment, or the easing credit still fails to kick into the real economy, it is still possible for the PBOC to cut interest rates.