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PBoC reduces reserve-requirement ratio

PBoC reduces reserve-requirement ratio

(21 April 2015 – China)  The People’s Bank of China (PBoC) reduced the main reserve-requirement ratio by 1 percentage point, effective 20 April, 2015.

The ratio reduction brings the level down to 18.5 percent for large lenders and lower for rural financial institutions.

The cut will allow banks to boost lending, freeing about RMB1.2 trillion (A$248 billion).

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, declined 20 basis points, or 0.2 percentage point, to 2.78 percent as of 9:44 a.m. in Shanghai, according to data compiled by Bloomberg.

That’s the lowest level since August 2012.

“Monetary easing is likely to be more aggressive in the second quarter amid growth and deflationary pressure,” said Zhou Hao, a Shanghai-based economist at ANZ Bank.

“We expect one more lending rate cut by the end of June, and the seven-day repurchase rate to approach 2.5 percent this week.”

The seven-day repurchase rate, a gauge of interbank funding availability, declined 20 basis points to a one-year low of 2.66 percent, according to a weighted average compiled by the National Interbank Funding Center.

The PBoC has reduced the rate for seven-day reverse-repurchases agreements five times since the beginning of March, cutting it by a total of 50 basis points to 3.35 percent.

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