China makes surprise rate cut to boost banking liquidity and the economy | CNN Business

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CNN
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China’s central bank has dramatically cut the amount of money banks must hold in reserves, to keep money flowing through the financial system. The economy

The People’s Bank of China (PBOC) said it will cut the Reserve Requirement Ratio (RRR). 0.25 percentage points across almost all banks, effective March 27.

“[We must] Create a sound mix of macro policies, better serve the real economy, and maintain sound and sufficient liquidity in the banking system,” the PBOC said. A statement.

The move came as a surprise late Friday and came a week after the move. Turmoil in global financial markets Some began with the failure of regional American banks.

As recently as Wednesday, Goldman Sachs analysts said they expected the PBOC to keep interest rates on hold. RRR “unchanged” through first half of 2023.

The central bank has already injected hundreds of billions of yuan into banking. system from January, mainly through the medium-term credit facility, analysts said.

The rapid collapse of two US banks and difficulties at Credit Suisse have raised concerns about the health of the global banking sector.

Regulators on both sides of the Atlantic have taken emergency measures since Sunday to provide liquidity support to distressed borrowers and boost confidence in the banking system. On Thursday, a group of America’s largest banks stepped in to rescue First Republic Bank with a $30 billion lifeline.

Earlier this month, PBOC Governor Yi Gang signaled at a news conference that monetary policy would remain largely stable this year.

“The current level of real interest rates is relatively reasonable,” he said.

But he also acknowledged that the RRR cut “is an effective monetary policy tool” to provide long-term liquidity and support the economy.