China's central bank to lower interest rates, bank reserve ratio for growth

Investing.com -- The People's Bank of China (PBOC) has reiterated its commitment to lower interest rates and the reserve requirement ratio for banks when the time is right, in a bid to support economic growth. These measures come as the Chinese economy continues to grapple with challenges on both domestic and international fronts.

The PBOC's monetary policy committee emphasized the need to intensify the country's monetary policy adjustments during its quarterly meeting held in late December, making them more forward-looking, targeted, and effective. The committee members at the meeting reaffirmed the need for a "moderately loose" monetary policy to bolster growth.

Despite the challenges, the Chinese economy remains generally stable, according to the meeting's readout. However, the readout also highlighted issues such as insufficient domestic demand and the intensification of adverse effects due to changes in the external environment.

Monetary policy support is considered key to China's economy in 2025, especially with US president-elect Donald Trump's promise to impose steep tariffs on Chinese goods. The PBOC had previously indicated it could free up more cash for banks by reducing the reserve requirement ratio (RRR) once again by the end of 2024. The bank is now expected to make this move in the first quarter of 2025, preserving a crucial tool that could help mitigate the negative effects of new US tariffs.

In addition, PBOC committee members have called for the maintenance of ample liquidity in the financial system and for guiding financial institutions to increase credit extension. The panel also stressed the need for improving the efficiency of fund utilization, strengthening the implementation of interest-rate policy, and preventing funds from being idled or used for arbitrage.

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Source: Investing.com