PBoC cut the required reserve ratio (RRR) for China’s banks on Sunday signaling a stepping-up of policy support. The cut also suggests that any concerns policymakers have about the rapid gains in equity prices have been put on the back burner for now. The RRR has been reduced by a minimum of 100bp, effective on Monday. It now stands at 18.5% for large banks. The decision is a response to the weakness of recent economic data. “We suspect the cut was partly the result of lingering disruption from Chinese New Year. Further RRR cuts are likely – perhaps another 150bp before the end of the year – along with at least one more cut to benchmark interest rates.” said Capital Economics
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