China's central bank cuts lenders' reserve ratios again

China's central bank on Friday announced a reduction in the reserves that banks are required to keep on deposit in a fresh move to stimulate the nation's economy.

The People's Bank of China said that from 16 September all lenders' reserve requirement ratios - save for those institutions already on the lowest RRR - would be reduced by 50 basis points, with an additional cut of 100 basis points for some smaller qualified banks to be implemented in two steps, one in October and another in November.

Combined, the two reductions would increase the amount of funds available for lending to people and businesses by 900bn yuan (£102.9bn), the PBoC said.

It was the latest effort to stimulate the nation's growth, which has been hampered by US tariffs placed on billions of dollars worth of Chinese goods.

In July, Beijing reported that second quarter year-on-year GDP growth came in at 6.2%, slowing from the 6.7% pace observed in the first quarter - which marked the weakest pace of expansion for 27 years.

Freya Beamish from Pantheon Macroeconomics said the bank's planned reduction in reserve requirements was larger than the 25 basis point cut that they had anticipated, though they did not anticipate the bank taking any further action on rates in 2019 unless trade tensions escalated.

The analyst also pointed out the PBoC's assertion in its statement that the PBoC was steering clear or massive monetary stimulus and that Friday's move should not be seen as a fundamental shift in monetary policy, with the targeted RRR cut meant to help smaller banks which often had lower deposit-to-reserve ratios .

Beamish concurred, saying: "Today's change is in part a top-up on previous measures, and partly reflects house keeping measures counterbalancing official support for the RMB.

"We continue to think that the bank will reduce its interest rate corridor by 20bp this month, following a cut from the Fed."