PBCO Should Cut RRR By 50 Bps: Advisor

The PBOC should consider cutting RRRs by another 0.5% to release lower-cost market liquidity, lower real interest rate and promote credit growth in the future, the 21st Century Business Herald reported citing Lian Ping, chairman of China Chief Economist Forum. He noted that the current weighted average level of the RRR is close to 9%, leaving room for another cut following the 0.5% reduction in July. The central bank should also roll over the MLFs maturing in Q4, and lower the real market interest rate by 15-25 bps by unleashing the potential of LPR reform, Lian was cited as saying. Monetary policy should be appropriately looser amid weak demand and slowing economic growth, said Lian, adding that the spillover effect of possible monetary tightening by the Fed is controllable by China.