PBOC May Cut RRRs to Fill Liquidity Gap in H2: Herald

The PBOC may time another RRR cut when the liquidity is pressured by CNY3.05 trillion of MLFs maturing before the yearend, as simply rolling over MLFs will see more funds going to large banks instead of smaller banks supporting SMEs, the 21st Century Business Herald reported citing analyst Luo Yunfeng with China Merchants Securities. The RRR cut in July lifted currency multiplier of creating money to a record high of 7.41, compared with the previous peak of 7.16 in August 2020, the newspaper said. The possible RRR cut will not affect the size of the central bank's balance sheet, as the contraction by about CNY1 trillion in July is mainly due to the decline in the balance of structural monetary instruments such as MLFs, the newspaper said.