Bloomberg report on a HSBC note today
- People's Bank of China to keep an accommodative policy
- To deliver further easing via new monetary tools like the medium term lending facility
- But the PBOC will cut the RRR by 50bp later in 2016
- No interest rate cut for the remainder of this year
- 200bp RRR cut in 2017
- 50bp interest rate cut in 2017, 25bps in Q1 and 25 in Q4
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The reserve requirement ratio (RRR) is a constraint on the capacity of banks to expand lending
In a nutshell, a lowering of the requirement increases funds available for lending.