Central Banks
PBOC Signals Liquidity Boost for Banks, Cautions on Rate Cut
- Deputy governor sees room to lower reserve ratio for lenders
- Policymakers in holding pattern after economy’s solid start
The People's Bank of China (PBOC) building in Beijing.
Source: Bloomberg
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China’s central bank signaled a potential boost to liquidity for banks while expressing caution on cutting interest rates, after the world’s second-largest economy reported an upbeat start to 2024.
There is still room to lower the reserve requirement ratio for banks, which is an important tool to adjust liquidity, People’s Bank of China Deputy Governor Xuan Changneng said during a Thursday briefing. Interest rate policy in the country can become more “autonomous” as deposit rates trend lower and other major global economies move toward easing, he added, alluding to current limitations from banks’ thin profit margins and the Federal Reserve’s elevated rates.