China's central bank ready to cut interest rates during trade war: economist

The People's Bank of China is expected to lower interest rates twice in 2019 and once in 2020 as part of the country's trade deal with the United States, an economist at the Bank of China said on Wednesday. America Merrill Lynch.

The United States has so far imposed a 25% tariff on Chinese goods worth $ 250 billion, and US President Donald Trump has threatened to apply the same levy. the remaining imports from China. In retaliation, Beijing has also increased tariffs on US products worth billions of dollars.

"The next group of 25% tariffs on $ 200 billion (Chinese products) would actually be much more severe in terms of suffering than it could inflict on overall growth," said Helen Qiao, chief economist for Greater China at Bank of America, Merrill Lynch.

The US central bank expects the US Federal Reserve to lower interest rates in September and December of this year, Qiao told CNBC.

If the trade war intensified, the PBOC could cut rates this year even more than the current two times, Qiao said. However, she has not ruled out the chances of a Washington and Beijing trade deal this year.

On the fiscal front, Qiao said China would likely deploy new infrastructure investment, consumer subsidies and fiscal measures to support the economy.

-Yen Nee Lee of the CNBC contributed to this report.