The People‟s Bank of China stuck some „coal‟ in the stockings of domestic consumers and international investors, with a Christmas Day rate hike of +25 basis points, the second hike enacted during the 4Q, taking the official One-Year Lending Rate to 5.81%
Evidence the chart on display below, exhibiting the +50 basis point increase from the recent record-tying low of 5.31% … and the push towards the 2008 pre-crisis level of 7.47%
From the PBOC …
… “The Central Bank will deploy various monetary instruments to manage liquidity and steer credit growth to normal levels.”
We note commentary from the PBOC Vice Chairman Hu Xiaolian …
… “China’s prudent monetary policy can help strengthen management of inflation expectations and prevent an asset price bubble.”
Earlier this month the Chinese government announced a shift to a “prudent” monetary policy, from an “appropriately loose” monetary policy.
In other words … the Chinese have completed the transition from „talking-the-monetary-talk‟, with three rapid-fire hikes in their bank Reserve Requirement Ratios, and this weekend‟s rate hike … they are now „walking-the-monetary-walk‟.
Local bankers are beginning to feel the pinch … as represented by the spike in the Overnight Interbank Repo-Rate, seen in the chart below. We focus on today‟s parabolic rise to 4.50%, taking this to its highest level since the 4Q of 2007 … and the fact that this rate has MORE than DOUBLED since the middle of December.
(To read the rest of this report, click Fullscreen below)
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