He expects the PBOC will instead cut the amount of cash banks must set aside early in the second quarter. Such market expectations came after Yi Gang, governor of the central bank, said last week that using the reserve requirement ratio (RRR) to release long-term liquidity remains an effective tool to aid economic recovery. "The PBOC will still provide sufficient liquidity to support credit growth," said Tommy Wu, senior China economist at Commerzbank. "The central bank could do so by cutting RRR. It may also guide the benchmark bank lending rates, the loan prime rates (LPRs), lower to reduce interest burden on households and businesses." China is due to release its monthly LPR fixing on March 20. ($1 = 6.9674 Chinese yuan) (Reporting by Winni Zhou and Brenda Goh; Editing by Kim Coghill and Jamie Freed)
Messaging: winni.zhou.thomsonreuters.com@reuters.net)) SHANGHAI, March 10 (Reuters) - China's central bank made
its biggest weekly cash withdrawal in more than two months this
week after liquidity conditions loosened at the start of the
month, at a time when some market participants expect a
reduction to banks' reserve requirements soon.
The People's Bank of China (PBOC) drained a net 983 billion
yuan ($141.09 billion) through reverse repurchase agreements in
open market operations this week, according to Reuters
calculations based on official data. The weekly net cash withdrawal, the biggest since the first
week of this year, marked the fourth straight week that the PBOC
took short-term money out of the banking system.
Markets appeared to be little fazed by the PBOC's latest
move, with the volume-weighted average rate of the benchmark
seven-day repo trading in the interbank market,
stood at 2.0104% around midday, not far from the PBOC's official
reserve repo rate for the same tenor of 2%.
Analysts expect the PBOC to keep a broadly accommodative
stance this year to support a nascent economic recovery, but
mixed data in the first few months of the year is stirring
debate in markets over whether its next move could be cautious
tightening or further easing.
"The central bank is very likely to control market rates at
around policy rate levels via open market operations," said Ming
Ming, chief economist at Citic Securities,
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