China's Central Bank Unveils Most Aggressive Stimulus Since Pandemic

• China's central bank on Tuesday unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary funk and back towards the government's growth target, but analysts warned more fiscal help was vital to hit these goals.
• The broader-than-expected package, offering more funding and interest rate cuts, marks the latest attempt by policymakers to restore confidence in the world's second-largest economy after a slew of disappointing data raised concerns of a prolonged structural slowdown.
• However, analysts questioned how productive the People's Bank of China's (PBOC) liquidity injections would be, given extremely weak credit demand from businesses and consumers, and noted the absence of any policies aimed at supporting real economic activity.
• Governor Pan Gongsheng told a news conference the central bank will soon cut the amount of cash that banks must hold as reserves - known as reserve requirement ratios (RRR) - by 50 basis points (bps), freeing up about 1 trillion yuan ($142 billion) for new lending.
• Depending on the market liquidity situation later this year, the RRR may be further lowered by 0.25-0.5 percentage points, Pan said in rare forward-looking remarks. The PBOC will also cut the seven-day reverse repo rate, its new benchmark, by 0.2 percentage points to 1.5%, as well as other interest rates.

(Source: Reuters)