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Bank of China sees high probability of further rate cuts in 2015

Updated: Dec 2,2014 8:19 PM     Xinhua

BEIJING — There is a high probability that the central bank will further cut the country’s benchmark interest rates in 2015, according to a report released by Bank of China (BOC) on Dec 2.

The forecast came nearly two weeks after the People’s Bank of China (PBOC) announced the first interest rate cuts in more than two years, aiming to lower private financing costs to help alleviate problems facing many enterprises.

In its outlook report for 2015, the BOC also foresaw a “rising probability” of the central bank lowering the reserve requirement ratio (RRR).

If companies’ financing costs remains high, the economy worsens significantly, or employment falls even after the central bank’s rate cut in November, the central bank will probably continue to cut rates in 2015, Gao Yuwei, a research fellow at the BOC, was quoted by the report as saying.

“From the perspective of stabilizing economic growth and adjusting the economic structure, the central bank will also apply quantitative tools in addition to the pricing ones,” said Gao.

“The central bank will probably lower the RRR once or twice in 2015,” Gao added.

The central bank will continue to apply prudent monetary policy in the next year, which will probably be flexible and targeted, so as to create a neutral and moderate monetary and financial environment for economic restructuring and upgrading, according to the report.

The BOC forecast that the country’s central bank will cap the growth rate of the outstanding broad money supply (M2) at 12 percent for 2015.