The People's Bank of China (PBOC) will keep interest rates at the current record low level until the end of 2018, predicts UBS Group AG.
Any intention to raise interest rates will be limited by the economic slowdown in the country and weak consumer inflation pressure, believe the bank’s analysts. At the same time, the reduction in the credit rate will not happen because of the Central Bank’s concerns regarding the appearance of a "bubble" on the asset market and pressure on the Yuan.
According to the UBS experts, the PBOC will maintain the standards of the bank’s reserve requirements and will continue to use other tools to manage liquidity, said Bloomberg.
The rise of China's GDP in the next year will slow to 6.4% and to 6% in 2018 due to the further decline in investment in construction and related sectors of the economy, predict analysts.
The fall of the renminbi, which is already trading at a minimum of 8 years, will continue. UBS expects the price of the Chinese national currency by the end of next year at 7.2 Yuan for $1 and the end of 2018 - 7.5 Yuan per $ 1.
China International Capital Corp’s economist, Liang Hong, believes that the next step of the PBOC will be a rate hike, not a decrease.
In general, analysts reduced projections for renminbi after the US presidential election, where Donald Trump has won. They expect that now the Chinese bank will allow its national currency devalue at faster pace against the dollar.
Fourteen of the sixteen experts interviewed by the agency this week, predict that by the middle of the next year, the rate will exceed 7 Yuan/$1.
According to Mizuho Securities, this level may be reached by the end of this year, and by the end of 2017 – a rate at 7.3 Yuan / $ 1. The level of 7.5 Yuan/$1 is likely to be "the bottom", given the support of a significant trade surplus of China, the experts believe.
Goldman Sachs changed its three-month forecast of the Chinese national currency rate to 7 Yuan/$1 from 6.7 Yuan/$1 expected in July.
Over the last year, the dollar increased by 7.5% against the Yuan.