Wednesday, February 4, 2015

China cuts bank reserve requirement to spur growth

While overbought/oversold trends should continue unwinding today, nothing has changed. Confidence in centralize management will decline when policies designed to encourage economic growth don't.  Even China's policy move, some of the most proactive among the economic powers, won't reverse global economic trends without structural reforms among its trading partners, i.e. biggest customers. The effects of tax and spend far outweigh a reduction in reserve requirements.

Headline: China cuts bank reserve requirement to spur growth

BEIJING (Reuters) - China's central bank cut the amount of cash that banks must hold as reserves on Wednesday, the first industry-wide cut in more than 2-1/2 years, as it increased efforts to shore up flagging growth in the world's second-largest economy.

The move, which came less than three months after China also cut interest rates for the first time in over two years, was widely expected by investors, who had bet that monetary policy had to be further loosened to lift economic growth from a 24-year low.

The reserve requirement ratio, or RRR, would be lowered by 50 basis points, the People's Bank of China (PBOC) said in a statement on its website. The cut is effective from Feb. 5 and will take the RRR for big banks to 19.5 percent.



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