PBoC’s ‘tremendous room’ to act could be tested soon

The People's Bank of China (PBOC) said the first phase of reserve requirement ratio (RRRs) cuts came into effect on Wednesday, and the move released about 100 billion yuan ($14.55 billion) worth of long term funds.

BEIJING: The boast by People’s Bank of China governor Yi Gang (pic) this month that he has “tremendous room” to adjust policy could soon be tested as the economy slows, throwing attention on the impact on the nation’s fragile currency and financial markets.

Compared to European and Japanese peers, China does have more obvious policy space. Its benchmark one-year lending rate has stayed at 4.35% since 2015, far above zero. The Federal Reserve’s dovish turn also eases the depreciation pressures on the yuan, leaving Yi even more room for manoeuvre.