China's Central Bank Lowers Policy Rate — Update

China's central bank cut a key policy rate and reduced the amount of funds banks must set aside, following through on its commitment earlier this week to provide more support for the slowing economy.

People's Bank of China Governor Pan Gongsheng had announced these moves at a briefing on Tuesday, which kicked off a stimulus blitz this week aimed at bolstering China's weakening economy.

The PBOC lowered the reserve requirement ratio for banks by 0.5 percentage point, effective immediately, bringing the average RRR to around 6.6%, the central bank said early Friday before the start of stock and bond trading.

However, financial institutions already operating with a 5% RRR won't benefit from this reduction, the central bank said.

In addition, the PBOC cut the interest rate on seven-day reverse repurchase agreements--its key policy rate--by 20 basis points, lowering it to 1.5%. This rate is also used to determine the nation's benchmark lending rates.

The central bank added that the interest rates for 14-day reverse repos, as well as for temporary repos and reverse repos, will continue to be adjusted in line with changes to the seven-day reverse repo rate.

Later in the day, the PBOC followed with cuts on another set of short-term policy rates by 20 basis points, lowering borrowing costs of its overnight, seven-day and one-month standing lending facility to 2.35%, 2.50% and 2.85% respectively.

China's government has accelerated the rollout of policy initiatives this week to jolt an ailing economy, with the country's top decision-making body pledging at a Thursday meeting to introduce even more fiscal and monetary support measures.

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September 27, 2024 09:13 ET (13:13 GMT)

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