Chinese CB Increases Stimulus by Cutting Bank’s Reserves

China’s central bank increased its economic stimulus measures even further Wednesday amid growing concerns about the rate of expansion in the world’s second-largest economy.

The People’s Bank of China (PBOC) decided to cut banks’ reserve requirement ratio (RRR) by 50 basis points to 19.5 percent. The move, effective Thursday, is the first such cut since May 2012. This will lower the amount of deposits that each lender is required to hold as reserves.

The measure will help keep the economy stable, the PBOC said alongside the decision which was announced around 10:30 a.m. GMT. It added that it will also help guide the appropriate growth in social financing.

Asian markets were closed during the announcement but their European counterparts received a boost on the news. Mining stocks like Fresnillo, which have a heavy exposure to China, rallied on the announcement as did Asian exposed lenders like Standard Chartered.

Australian and New Zealand, whose economies are heavily reliant on the Chinese economy, saw their currencies lift on the news.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza