China's Central Bank Announces Sweeping Rate Cuts and RRR Reduction to Stimulate Economy

Sep 24, 2024, 01:34 AM

China's central bank, the People's Bank of China (PBOC), announced a series of monetary policy measures aimed at stimulating the economy amid ongoing economic slowdown and a beleaguered property market. The PBOC cut the 14-day reverse repo rate by 10 basis points to 1.85% and reduced the reserve requirement ratio (RRR) for banks by 50 basis points, effective by the end of the year. This move is expected to inject approximately 1 trillion yuan of long-term liquidity into the financial market. Additionally, the central bank announced plans to cut the 7-day reverse repo rate to 1.5% from 1.7% and lower the mortgage rates on existing housing loans by an average of 0.5 percentage points. The minimum down payment ratio for second home purchases will be reduced from 25% to 15%. The PBOC will also allow funds and brokers to tap central bank funding to buy stocks, and new monetary policy tools will be introduced to support the stock market. The yield on the 30-year Chinese government bond hit a record low of 2.14%, and the 10-year bond yield fell to 2% for the first time. These measures, announced by PBOC Governor Pan Gongsheng, are part of a broader effort to achieve the annual growth target of around 5% and stabilize the economy.