China's central bank on Friday announced a cut in the reserve requirement ratio (RRR) by 0.5 percentage points for financial institutions.
Starting Friday, the weighted average RRR for lenders will come to 6.6 percent, while those that have already implemented a 5 percent RRR will not be included, according to a statement of the People's Bank of China (PBOC).
The PBOC will continue to maintain a supportive monetary policy stance, intensify the strength of monetary policy adjustments, and enhance the precision of monetary policy regulation. This will create a favorable monetary and financial environment for stable economic growth and high-quality development in China, its governor Pan Gongsheng said on Monday.
China's central bank reduced the interest rate of seven-day reverse repurchases from 1.7 percent to 1.5 percent on Friday.
The rate cut decision aims to further strengthen counter-cyclical adjustment of monetary policy and support stable growth of the economy, the PBOC said.
"Overall, the aim of the recent series of policies is to consolidate the real estate market, curb a decline and promote stability. This will intensify the counter-cyclical adjustment of macroeconomic policies, effectively boost domestic demand, guide the price level to rise moderately, and improve the momentum of economic growth. It will help the country to achieve this year's economic and social development goals, and at the same time, create a more favorable macroeconomic environment for cultivating new quality productive forces and promoting high-quality development," said Wang Qing, chief macroeconomic analyst at the Golden Credit Rating International.
The operating rates of 14-day open market reverse repo and temporary reverse repo will continue to be determined by adding or subtracting points from the operating rate of 7-day open market reverse repo, and the range of addition or subtraction will remain unchanged.
The PBOC conducted 292 billion yuan (about 41.5 billion U.S. dollars) of 14-day reverse repos at an interest rate of 1.85 percent Thursday.
The central bank cut the interest rate of seven-day reverse repos from 1.8 percent to 1.7 percent in July.
A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.
China cuts reserve requirement ratio by 0.5 percentage points
