MNI BRIEF: PBOC Has Room For RRR Cuts - Official

MNI (BEIJING) - The People’s Bank of China will increase countercyclical adjustments with room to lower the reserve requirement ratio, though further interest-rate cuts will prove difficult, Zou Lan, head of the Monetary Policy Department at the PBOC, told reporters on Thursday.

The current average reserve requirement for financial institutions is about 7%, leaving room for downward adjustments, Zou said. Monetary easing would require observation of economic trends, he noted, adding that the 50 basis point RRR cut at the beginning of the year is still affecting the economy. (See MNI: PBOC Eyes Lower Rate For GDP Target, RRR Cut Optional)

However, the rapid inflow to asset-management products from bank deposits and narrowing net interest margin of banks are constraining further declines in deposit and loan interest rates, Zou continued. (See MNI INTERVIEW 2: China Fiscal Expansion Crucial, RRR Cut Eyed)