The Chinese People’s Bank of China (PBOC) will not necessarily follow the Federal Reserve‘s overnight rate hike in the near-term as the world’ second largest economy seeks stability ahead of a leadership reshuffle this fall, observers said Thursday.
“As a trend basis, if the Fed continues on the normalization cycle, then one would envisage that the PBOC would move in sync. But right now, I don’t think it will trigger any immediate follow suit type of tightening,” said Mizuho Bank senior economist, Vishnu Varathan.
“I think what the PBOC is really watching is their own money market needs and and they are going to pair it with how they’re looking at credit overall, in particular the shadow banking space,” he added to CNBC’s The Rundown.
On Wednesday, the Federal Open Market Committee increased its benchmark target a quarter point.
China‘s benchmark lending rate has not changed in almost two years, but the central bank surprised markets in March by raising short and medium-term interbank rates hours after the last Fed hike.