BUSINESS China's central bank denies rumors of targeted RRR cut


China's central bank denies rumors of targeted RRR cut

Global Times

04:53, April 25, 2019


View of the headquarters and head office of the People's Bank of China (PBC) in Beijing. (Photo: IC)

The People's Bank of China (PBC), the nation's central bank, has denied rumors of a 100 basis point targeted reserve requirement ratio (RRR) cut covering rural financial institutions that would be effective on Thursday. 

The PBC said that at present, there is no new policy on targeted RRR cuts, according to on Tuesday.

The PBC also denied plans to adjust reserve requirements based on the quarterly macro prudential assessment, according to the report. Currently, the targeted RRR change for inclusive finance only takes place at the beginning of every year, the PBC responded. 

This is the second time in less than one month that the PBC has denied rumors of RRR cuts. On March 29, the central bank denied reports of a 50-basis-point RRR cut. 

The central bank has filed police reports over the rumors.

"The rumors that have been going on since the beginning of this year could mean that there is a market expectation of RRR cuts, but statistics from the first quarter of 2019 show that China's economy is reviving and there is sufficient liquidity in the economy," Liu Xuezhi, an economist at Bank of Communications, told the Global Times. "Unnecessary RRR cuts would only increase liquidity and generate inflationary pressure."

In the first quarter of 2019, GDP grew 6.4 percent year-on-year, official data showed. 

Liu forecast that monetary policy would remain prudent and neutral in at least the current quarter. Such a stance would also be in line with the PBC's prudent monetary policy.

During a quarterly meeting of the PBC's monetary policy committee on April 15, regulators vowed to maintain a prudent monetary policy and strengthen coordination among monetary, fiscal and other policies to prevent risks and maintain stable growth."Especially as the economy is now performing above expectations, monetary policy should refrain from using a deluge of stimulus," Liu said. 

The PBC's swift response to the rumors also shows it is very cautious of any unexpected policy change that would cause market volatility, Liu said.

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