Brian Jackson, a Hong Kong-based strategist with Royal Bank of Canada, comments on the People’s Bank of China’s announcement that it will cut the reserve requirement for the nation’s lenders by 0.5 percentage points from Dec. 5.
“Today’s reserve requirement ratio cut comes a little earlier than we expected but in line with our view that Beijing will prefer to use this tool as the first option to adjust policy stance.”
“Reserve requirement ratios were also one of the initial tools used when policy began to be tightened in 2010 and have been at historically high levels throughout 2011, so this move provides a quick and easy way to free up reserves and loosen credit conditions ahead of the usual seasonal surge in bank lending in the first quarter.”
“More reserve requirement ratio cuts are likely in coming months as policy-makers respond to the weaker global growth outlook, though we continue to expect no change to benchmark policy rates for the time being.”
To contact Bloomberg News staff on this story: Zheng Lifei in Beijing at Lzheng32@bloomberg.net