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ASR / BBG: China’s Mounting Risks Set Stage for PBOC to Rein In Stimulus
12th AUG. 2022
ASR’s Adam Wolfe - in discussion with Bloomberg – anticipating a trade off from the PBOC : Adam commented that the PBOC “should be preventing leveraged positions in the bond market from building up…”
…. which calls for draining liquidity.
“But the need to support growth means the central bank is likely to roll over most of the MLF funds to avoid sending a wrong signal that it’s withdrawing liquidity support”.
The PBoC did end up draining some liquidity, but it also cut the interest rate…. so a bit of stimulus and a bit of tightening at the same time, in line with the trade-off Adam mentioned.
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