China: Reform-oriented stance augurs targeted RRR cuts - ANZ

ANZ analysts suggest that their scenario analysis suggests that a 50bp cut in the reserve requirement ratio (RRR) of PBoC will release about CNY800bn of reserve money into the system, while a 100bp cut will release about CNY1,600bn.

Key Quotes

“A 50bp cut will also lift the Excess Reserve Ratio (ERR) from 1.7% in February (our estimates) to 2.2%, while a 100bp cut will boost it to 2.7%. Either way, a cut will help restore liquidity in the banking sector to levels comparable to that seen in end-December 2018.”

“The higher ERR derived from a RRR cut could be associated with a 25bp reduction in the weighted average lending rate, according to our calculations. This echoes Premier Li Keqiang’s commitment, made at the recent National People’s Congress (NPC), to reduce funding costs for the private sector.”

“We believe the People’s Bank of China (PBoC) is not inclined to cut the benchmark lending and deposit rates. It will also keep the 7-day reverse repo rate on hold, unless other major central banks resume a rate-cutting cycle. Instead, the PBoC is likely to use multiple tools to influence the actual lending rates that banks are charging their clients.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD struggling at the lows ahead of US GDP

EUR/USD is trading below 1.1150, consolidating its losses. Markets are stalling ahead of the all-important US GDP report which carries high expectations. Some suspect a "sell the fact" response in reaction to an OK number.


GBP/USD trades around 1.2900 amid the Brexit impasse

GBP/USD is trading around 1.2900, recovering the lost ground after hitting two-month lows. The Brexit impasse weighs as the main parties have not made progress. The anticipation to US GDP limits movements.


USD/JPY: waiting for US Q1 GDP

Japanese data was mixed, with Tokyo inflation up but factory output collapsing. US advanced Q1 GDP foreseen up by 2.1% vs. the previous quarter 2.2%.


US First Quarter GDP Preview: Reasons to be cheerful

US economic growth forecast to be stable in the first quarter. Improved consumer attitudes and retail sales give reason for optimism. Labor market key to economic growth.

Read more

Gold climbs to 1-1/2 week tops, back above $1280 level ahead of US GDP

Gold edged higher on the last trading day of the week and jumped back above $1280 level, just above over one-week tops set in the previous session.

Gold News