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MNI BRIEF: PBOC Cuts RRR By 50 Basis Points, Keeps Neutral Policy Stance

MNI (Singapore)

The People's Bank of China (PBOC) cut the cash reserve ratio requirement for banks on Friday by 50 basis points, releasing CNY1 trillion (USD154 billion) of long-term funds into the system to help SMEs facing rising costs amid higher commodity prices.

The cut will be implemented on July 15, according to a statement on its website. After this reduction, the weighted average RRR of financial institutions will be 8.9%.

The PBOC said it has not changed its prudent monetary policy stance and the cut is a routine operation that returns monetary policy to normal. Funds released will be used by financial institutions to return the maturing medium-term lending facility (MLF) and fill in the liquidity gap during the tax season in mid-to-late July.

The cut will reduce banks' borrowing cost by about CNY13 billion a year, promoting lower financing costs of the society.

The PBOC's announcement today, the first since a 100 basis points RRR cut in April 2020, was expected by the market after the executive meeting of the State Council chaired by Premier Li Keqiang had unexpectedly hinted of an RRR cut on Wednesday.


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