China's central bank governor, Yi Gang, signaled Friday that the People's Bank of China could reduce the size of deposits commercial banks have to set aside this year in a bid to unleash long-term funds to support the nation's economy.
China has cut the so-called reserve requirement ratio 14 times since 2018, which brought the RRR level from around 15% to 8%, but the RRR cut is still an "effective" way to support the economy and keep the liquidity at a reasonable level, Mr. Yi said in response to a question raised at a briefing.
When asked about the possibility of a cut in benchmark interest rates, the governor said the current level of real interest rates was appropriate.
Mr. Yi said he expects the Chinese yuan to be stable at an equilibrium level this year, which is often used by officials to describe their foreign-exchange policy goal, and the currency may experience small fluctuations, which should be good to the economy.
Early economic indicators showed the Chinese economy rebounded more strongly than market had expected in the first two months of the year after Beijing abruptly abandoned its Covid-19 restrictions late last year.
Liu Guoqiang, a vice governor at the PBOC, said in the same briefing Friday that the central bank would refrain from big swings in its monetary policy, despite the economy reporting positive changes.
The central bankers said the PBOC will remain wary of any inflation upticks and that China's consumer inflation was at an "ideal" level last year.
Mr. Liu also said the rapid increase of household savings in 2022 was a result of Covid-19 restrictions that restrained residents' ability to spend and invest. Household savings will return back to normal this year when economic growth and household confidence recover, he said.
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(END) Dow Jones Newswires
03-02-23 2255ET
