The Chinese Central bank announced on Friday that it cut RRR for commercial banks for the third time since the beginning of the year, freeing a total of 900 billion yuan ($126.35 billion) of liquidity to boost lending in order to support a slowing economy.
The People’s Bank of China announced on its website that it has reduced the required reserve ratio by 50 basis points for all banks and an additional reduction of 100 basis points for some lenders that meet certain requirements. It was an expected step of the regulator to cope with detrimental effects of trade war with the US.
Since the beginning of 2018, the Central Bank of China has reduced the reserve requirement seven times, making it a primary tool of transmission of the monetary policy. The large-scale cut will take effect on September 16th. Additional targeted reduction will be carried out in two stages, from October 15 and from November 15.
Yuan rose on the news on Friday, Chinese stocks enjoyed the move, rallying too. Gold and other safe heavens plunged; bonds pared recent tremendous gains anticipating a boost of risk appetite on the world markets.
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