Release The Liquidity! China’s PBOC Cuts Required Reserve Ratio Releasing $126BN In Liquidity, Renminbi Rises

On Friday the PBOC announced it would cut the required reserve ratio (RRR) for all banks by 0.5% effective Sept. 16 (and by 1% for some city commercial banks, to take effect in two steps on Oct. 15 and Nov. 15), releasing 900 billion yuan ($126 billion) of liquidity in the PBOC’s first broad and targeted RRR cut since 2015, helping to offset the tightening impact of upcoming tax payments.

While today’s rate cut – which was expected following the State Council meeting and ahead of the Oct.1 National Day Chinese holiday – was more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC stated that “China won’t adopt flood-like monetary stimulus” and that they will continue “prudent” monetary policy to “keep liquidity at (a) reasonably ample level” and will “strengthen the counter-cyclical adjustment.”

Or China is panicking over their slowing economy at 1.6% QoQ.

pbocres

The offshore Renminbi spike sharply on the announcement.

yuanyug

Release the liquidity!

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