Will PBOC Raise Its Key Rate After Fed?

Forex News

The People's Bank of China (PBOC) could execute a rate increase after similar steps of the US central bank. "Although the PBOC is still likely to raise interest rates slightly in open market operations, China does not need to follow the Fed to raise interest rates in the long run, let alone raise benchmark deposit and lending rates," Sheng Songcheng (an adviser to the PBOC) stated.

According to the economist, China's central bank would try to find a way to steer its market interest rate adjustments and further cuts in banks' reserve requirement ratios (RRR). Analysts predict, that the China’s central bank will raise its key rates on Thursday, while keeping benchmark interest rates unchanged, as it did in previous rounds of Fed rate increases.

Markets have generally expected another RRR cut in the second half after a surprise reduction in April, with some speculation that it could come as early as June or July.

Today, following the results of a two-day meeting, the US Federal Reserve will publish its statement on monetary policy along with an updated set of economic forecasts by Federal Reserve officials. It is widely forecast, that the US central bank will raise the target range for its benchmark interest rate by another 25 basis points to a new level of 1.75% -2%. Markets also expect any hints about further rate hikes from the Fed.