the clipping will contribute to “maintaining liquidity reasonably sufficient and promote a steady fall in global financing costs”, while will help stabilize the slowdown in the economysaid the entity.
The PBOC has been walking a tightrope on policy, trying to prop up the slowing economy, but keen to avoid big interest rate cuts that could fuel inflationary pressures and the risk of exits from China, as the Federal Reserve and other central banks raise rates to combat inflation.
“The reduction help banks follow a directive to defer loan repayments of the companies that fight against increasing confinement restrictions“he said in a note mark williams, from Capital Economics. “But few businesses or households are willing to commit to new lending in this uncertain environment.”
The reduction comes after another reduction of 25 basis points in April and was highly anticipated, after state media on Wednesday quoted to cabinet saying China would use appropriate reserve ratio cutsalong with other monetary policy tools, to maintain reasonably ample liquidity.
The PBOC also said on Friday that he will intensify the application of his prudent monetary policy and will focus on support for the real economywhile avoiding a flood-type stimulus.
The The world’s second largest economy suffered a broad slowdown in October and a recent rebound in COVID-19 cases has deepened the concern about growth in the last quarter of 2022. The economy was already under pressure from problems in the real estate sector and weakening global demand for Chinese goods.
Source: Ambito
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