The People’s Bank of China reduced the reserve requirement ratio for most banks by 25 basis points, lower than economists had expected.
China’s central bank gave lenders a modest cash boost on Friday and refrained from cutting interest rates, taking a cautious approach with monetary easing despite the worst COVID-19 outbreak in two years taking a toll on the economy.
The RRR cut was signalled by the State Council, China’s cabinet, at a meeting on Wednesday, and followed repeated warnings from top officials about risks to growth and the need for more monetary and fiscal stimulus. Economists have been downgrading their growth forecasts for the year to well below the government’s target of around 5.5 per cent.
Earlier Friday, the PBOC refrained from cutting interest rates and injecting extra liquidity into the economy via the medium-term lending facility. At the same time, authorities urged commercial lenders on Friday to lower their deposit rates, according to people familiar with the matter, a move to help ease funding costs for banks so they can boost lending.
The weighted average ratio for banks will drop to 8.1 per cent after the reduction, the PBOC said in a statement, down from 8.4 per cent previously.