China’s central bank made its biggest cash withdrawal from the financial system in three months this week, raising market suspicion that policymakers are gradually coming out of the monetary easing of the Covid-19 crisis period.
Chinese authorities stepped up monetary easing in the second quarter of this year to fight the worst Covid-19 outbreak in two years, but recent signs of economic recovery could allow them to normalize monetary policy and avoid wider divergences from other major economies. that have aggressively raised interest rates, traders and analysts said.
The People’s Bank of China cut its daily cash injection to a minimum of 3 billion yuan via open market operations this week, resulting in a weekly net drain of 385 billion yuan ($57.46 billion), the largest withdrawn since early April, when Shanghai’s financial center entered a two-month lockdown to contain the spread of the virus.
“Monetary policy has returned to normal in a crisis response mode,” said Ming Ming, chief economist at CITIC Securities.
The central bank reduced the amount of money banks need to hold in reserve in April and lowered the benchmark used for setting mortgage prices in May to stimulate the economy.
More recently, data from the manufacturing and services sector surprised to the upside.
“Looking ahead, we think the monetary authority will be careful and data-dependent to calibrate its stimulus,” Citi analysts said in a note, predicting further rate cuts in the coming months.
Source: CNN Brasil
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