China: Industrial PMIs and Monetary Policy

Posted July 1, 2011 by CLeahey

[private]undergoing a process of cooling, subjected to a rather aggressive monetary tightening and facing considerable risks abroad. But clearly, until the series stabilizes the question of whether the deceleration of China’s economy will lead to a hard landing will remain alive.

– China’s PMIs provide evidence of the likely limits of tightening, beyond which the costs in terms of economic activity would become central to future decisions. And at the central bank, that probably means that interest rate increases may soon be over (with perhaps one more still coming)—particularly if annual inflation, as expected, begins to descend in the next few months.

7-1-11–EMG INDICATORS AND INSIGHTS _China’s PMIs_[/private]