China’s PBOC Cut RRR Again Sunday, Easing Credit To Boost Growth
China’s central bank cut both the requirement reserve ratio (RRR), the amount of reserves banks required to hold, and benchmark interest rates Saturday.
The credit-easing move, to be effective Sunday, aims to “support the real economy and promote restructuring,” said the People’s Bank of China (PBOC) in an announcement.
The central bank cut the RRR for commercial banks serving rural areas, agriculture and small businesses by 50 bpts. The RRR for finance companies, or non-bank financial institutions, will be lowered by 300 bpts, the PBOC announced.
Benchmark interest rates have also been cut.
Interest rates for 1-year lending and deposits are cut by 25 bpts to 4.85% and 2% respectively. Lending of other terms and kinds will also be lowered by the same margin, the announcement said.
It is the 3rd RRR reduction in 5 months, and the 4th round of interest cuts in 7 months.
Against the backdrop of “new normal” of slower but more sustainable growth, China still faces a tough task of stabilizing growth and needs to continue to use the monetary policy tools flexibly in order to lower borrowing costs and boost economy through restructuring, the PBOC said while explaining its decisions to the press.
“China will maintain the prudent monetary policy and further push forward the reforms of interest rate liberalization and the RMB exchange rate formation mechanism,” it said.
The purpose of the RRR reduction is to boost financial institutes’ abilities to support farmers, rural and agricultural development as well as small and micro businesses, the PBOC said.
The rare easing step of cutting the RRR and the benchmark interest rates will make the monetary policy adjustment more targeted and effective to support the real economy.
Have a terrific week.
HeffX-LTN
Paul Ebeling
The post China’s PBOC Cut RRR Again Sunday, Easing Credit To Boost Growth appeared first on Live Trading News.