MNI BRIEF: PBOC Cuts RRR By 25 Bp As Covid Clouds Recovery

The People's Bank of China (PBOC) cut the reserve ratio requirement for banks on Friday, releasing CNY500 billion long-term funds to boost confidence as fresh Covid outbreaks raise concerns about the economic outlook. The rate was cut by 25bp for most banks whose RRR is higher than 5%, with an aim of maintaining "ample liquidity and a reasonable growth in money supply and credit”, the PBOC said in a statement on its website.

MNI reported earlier this month that the PBOC would cut the RRR in near term (See: MNI PBOC WATCH: Targeted Easing To Boost Credit, RRR Cut Seen)

The latest cut will be implemented on December 5 and will reduce banks' borrowing costs by about CNY5.6 billion a year, lowering financing costs for the real economy, the statement said. The weighted average deposit reserve ratio for financial institutions will be about 7.8% after the adjustment. (See: MNI: PBOC Set To Cut RRR As Covid Hits, Yields Spike)

The latest move was expected after the State Council on Wednesday called for the “timely and appropriate” use of RRR cuts while maintaining the economy in a “reasonable range” and striving for “a good result” for growth. The PBOC’s statement also said it will remain a “reasonable expansion” of the credit, ensure the carryout of policy package to boost economy and enable financial institutions to support small and medium-sized businesses suffering pandemic outbreak.