PBOC Prepared to Take Action if Growth Slows

China’s central bank is prepared to take its strongest action since 2012 to loosen monetary policy if economic growth slows further, by cutting the amount of cash that banks must keep as reserves, sources involved in internal policy discussions say.

A cut would be triggered if growth slips below 7.5 percent and towards 7.0 percent, they said, and would come on top of money market operations and currency intervention via state banks that traders say has already loosened monetary conditions.

Apart from supporting a stumbling economy, the stronger action of cutting bank reserves would provide a cushion against any shocks from financial reforms that the central bank is widely expected to push through this year, including a widening of the yuan’s trading band to give the currency more room to rise or fall each day and allowing banks more room to set deposit rates.

CNBC

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.