Although more central banks from emerging economies are likely to join the latest wave of interest rate cuts, economists didn't think the People's Bank of China (PBOC), China's central bank, would follow suit in the near term. Feng Guo, senior economist of the Asia/Pacific Department cheap air max 2012 of Washington-based IIF, told Xinhua China's first quarter gross domestic product (GDP) growth of 7.7 percent year on year was not very low, still above the government's 7.5 percent target. ECB president Mario Draghi recently said the ECB was considering buying asset-backed securities among possible options to support lending to SMEs, which was critical to bring unemployment down in the eurozone.
The big background is that growth in the mature economies is very weak. The domestic demand is very weak. That's because of fiscal consolidation, and you have problems in the banking sector. So that's why all the central banks of the G3 (United States, eurozone and Japan) have lowered nike air max shoes 2012 interest rates closer to zero and launched unconventional monetary policies, Huefner said. But inflation was the major concern for the PBOC as China's Consumer Price Index (CPI) rose 2.4 percent year-on-year in April. Because of these measures, money flows out of mature economies into emerging markets. And emerging markets are responding by lowering interest rates, Huefner said. When a country cuts interest rates, it reduces the appeal to investors of holding the currency and weakens the currency.
Huefner also said the European Central Bank (ECB), and the central banks of South Korea and Australia cut interest rates partly because of the yen's depreciation against their currencies. The yen has depreciated about 30 percent against the U.S. dollar since early October 2012. Guo also believed cheap nike air max yen's depreciation had limited impact on China's economy as the Bank of Japan's monetary easing was less powerful than the Fed and the yen was far less important than the U.S. dollar as an international reserve currency. The importance of exports to Japan has declined for China over the past 10 years. Japan was China's fifth largest export market in 2012, Guo said.