People’s Bank of China cuts reserve requirement ratio by at least 0.25 points-Bloomberg

The People’s Bank of China (Central Bank) announced on the 15th that it will reduce the reserve requirement ratio of commercial banks by 0.25 points. Strengthen economic support amid the spread of coronavirus infection.

For some small and medium-sized banks, the price will be further reduced by 0.25 points. The reduction will be implemented on the 25th. It is said that this will release liquidity worth 530 billion yuan (regarding 10.5 trillion yen). The People’s Bank also lowered the reserve requirement ratio in December last year.

RRR Cut

China’s average reserve requirement ratio for banks to drop once more

Source: People’s Bank of China

The State Council suggested lowering the reserve requirement ratio at the meeting on the 13th. Leaders insisted on the need for monetary and fiscal policies to stimulate the economy as the economic outlook deteriorated, but the People’s Bank left the interest rate on the medium-term lending system (MLF) unchanged on the 15th and added it to the financial system. The provision of liquidity was also postponed.

People’s Bank of China sees off unexpected rate cuts-focus on lowering reserve requirements

Meanwhile, a person familiar with the matter said that the government requested the commercial banks to reduce the deposit interest rate on the 15th in order to support the economy.

China urges commercial banks to reduce deposit interest rates, economic measures-related parties

Most economists expected the reserve requirement ratio to be reduced by 0.5 points. The smaller than expected cuts for most banks suggest a cautious approach to monetary easing by the People’s Bank. After the announcement of the cut, China’s 10-year government bond yield rose 1 basis point (bp, 1bp = 0.01%) to 2.77%.

Downward Pressure

China’s growth outlook is threatened by worsening outbreaks

Source: National Bureau of Statistics, Bloomberg surveys

Original title:China’s Central Bank Gives Lenders Cash Boost to Spur Growth (1)PBOC Cuts Banks’ Reserve Ratio by At Least 0.25 Percentage Point (excerpt)

(Update by adding the last paragraph)