China to follow the Fed in raising rates: Traders 

Dhaka,  Thu,  24 August 2017
Published : 12 Jun 2017, 15:03:01
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China to follow the Fed in raising rates: Traders 

China to follow the Fed in raising rates: Traders 
A small majority of traders in China's financial markets think its central bank will likely raise short-term interest rates this week if the US Federal Reserve hikes its key policy rate, according to a Reuters poll.

The People's Bank of China (PBOC) surprised markets in mid-March by raising short- and medium-term interbank rates hours after the Fed raised overnight borrowing costs.

The move prompted some analysts to speculate the PBOC had decided to "synch" its moves with those of the US central bank in a bid to reduce persistent depreciation pressure on the yuan currency against the dollar and discourage capital outflows.

It also dovetailed with China's pledges to tackle risks from an explosive rise in debt.

Six out of 10 traders in China's money, forex and bond markets asked by Reuters said they believed China would move rates up if the Fed did so.

But the size of the move would be more modest, and it would likely be confined to rates on open market operations (OMOs), the traders said.

They did not expect a hike in China's benchmark lending rate, which has been unchanged for nearly two years.

The Fed is expected to increase interest rates by another 25 basis points at its June 13-14 meeting, according to Reuters.
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