Pan Gongsheng, Governor of the People’s Bank of China (PBOC), announced during the 2024 Lujiazui Forum in Shanghai that China will reduce the reserve requirement ratio (RRR) by 50 basis points in the near term. Pan didn’t specify the exact timing but mentioned the possibility of a further 0.25 to 0.5 basis points cut by year-end. Additionally, the PBOC will lower the 7-day repo rate by 0.2 percentage points.
China’s 10-year government bond yield dropped to a record low of 2% following Pan’s remarks. He also hinted at a potential 0.2-0.25% reduction in the loan prime rate (LPR), though he did not clarify whether this pertains to the one-year or five-year LPR. The PBOC had previously maintained its main benchmark lending rates during the latest monthly fixing.
The policy announcements are expected to be published on the central bank’s website soon, a departure from the norm where such information is typically released online or through state media.
The press conference was held in response to the U.S. Federal Reserve’s recent interest rate cut, which gave China’s central bank more leeway to stimulate economic growth amid deflationary pressures. Pan took office as PBOC governor in July 2023 and had previously indicated room for RRR cuts, a move widely anticipated in the coming months.
Unlike the Fed, which focuses on a main interest rate, the PBOC employs various rates to manage its monetary policy. Despite not changing the loan prime rate in light of the Fed’s cut, the PBOC recently lowered the 14-day reverse repo rate to 1.85%. Pan aims to make the 7-day repo rate the primary policy rate.
China’s economic growth has slowed, impacted by a real estate downturn and low consumer confidence, prompting calls for more substantial fiscal stimulus. Further updates are anticipated as this situation unfolds.
Original Story https://www.cnbc.com/2024/09/24/chinas-central-bank-chief-set-to-hold-press-conference-days-after-fed-rate-cut.html
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