PBOC Signals Room for Reserve Requirement Cuts to Release More Liquidity

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The People’s Bank of China

China’s central bank still has room to lower reserve requirement ratios (RRRs), but interest rate cuts are limited by constraints, Zou Lan, head of the central bank’s monetary policy department, said at a press conference Thursday.

Since the start of 2024, the People’s Bank of China (PBOC) has made three significant monetary policy adjustments, including restarting government bond purchases as it maintains financial stability amid slowing growth.

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China's central bank may continue reducing the reserve requirement ratios (RRRs) and is considering additional monetary easing despite limited room for interest rate cuts.
Since early 2024, the PBOC has made significant policy adjustments, including resuming government bond purchases to maintain financial stability amid slowing economic growth.
Upcoming strategies focus on refining interest rate regulation, expanding the monetary policy toolkit, and developing a market-oriented interest rate framework, with the central bank's net purchase of 100 billion yuan ($14.1 billion) in August.

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What Happened When

Since the start of 2024：: The PBOC has made three significant monetary policy adjustments, including restarting government bond purchases.

In 2024：: The impact of earlier RRR cuts is still unfolding.

In 2024：: The PBOC has redefined the seven-day repurchase operation rate as the primary policy interest rate, moving to fixed interest rate bidding.

August 2024：: The PBOC resumed trading government bonds and bought net 100 billion yuan ($14.1 billion) of government bonds.

2024-09-05：: Zou Lan, head of the central bank’s monetary policy department, said at a press conference that the PBOC still has room to lower RRRs but interest rate cuts are limited by constraints.

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