China's easing moment may be short lived

LONDON, March 17 (Reuters Breakingviews) - Western central banks’ new hesitation on interest rate hikes has given Beijing more breathing room. The People’s Bank of China announced late on Friday that it would cut the reserve requirement ratio (RRR) for most banks by 25 basis points, releasing around 600 billion yuan ($87 billion) of long-term funds, per Zhongtai Securities estimates.

The decision came as a surprise, as the central bank has been generously pumping up bank liquidity when rolling over maturing medium-term policy loans. The difference is that the latest move would push down banks’ lending costs, which will hopefully be passed on to companies and consumers. Such a subtler easing approach reinforces Governor Yi Gang’s view that China’s interest rates are at “appropriate” levels for now. Worries about the country’s mounting corporate and household debt help explain why Yi may favor keeping rates steady for longer. (By Yawen Chen)

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