During a press conference on Tuesday, People’s Bank of China Gov. Pan Gongsheng revealed that China will reduce the reserve requirement ratio (RRR) for banks by 50 basis points in the near term and also mentioned the possibility of a further 0.25 to 0.5 basis point cut by the end of the year, depending on conditions.
Moreover, after lowering the 14-day reverse repo rate by 10 basis points to 1.85% on Monday, whilst keeping the 7-day reverse repo rate unchanged, Pan expressed a desire for the 7-day rate to serve as the primary policy rate and plans to reduce the rate by 0.2 percentage points.
The central bank governor also hinted at a potential 0.2-0.25% reduction in the loan prime rate without specifying the timeframe or whether it applies to the one-year or five-year LPR after announcing its decision to keep both rates steady at 3.35% and 3.85%, respectively, last Friday.
China’s economic growth has decelerated due to a real estate downturn and subdued consumer confidence. Economists are urging for increased stimulus measures, particularly on the fiscal front.
