PBOC may gradually shift away from RRR cuts – Bloomberg
The People’s Bank of China (PBOC) may refrain from using the reserve requirement ratio (RRR) as a monetary policy tool, as it is becoming less effective in addressing the structural challenges facing the economy, Bloomberg reports, citing economists from Nomura and Standard Chartered.
The economist at Nomura said: “We do believe the space for RRR cut is quite limited now,” adding that “RRR cuts as a significant tool of monetary easing will be history soon.”
Nomura said: “The ratio will likely become a neutral tool to maintain financial stability after another couple of reductions.”
Meanwhile, an economist at Standard Chartered noted that he “sees the PBOC making more use of its medium-term lending facility, open-market operations and the relending program. In the longer run, the PBOC may need to consider purchasing government bonds to expand the monetary base.”
The PBOC will use the RRR cut sparingly, only when it needs to send a strong easing signal,” Standard Chartered said.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
