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Frequent RRR cuts increase yuan deprecation pressures

Xinhua, August 5, 2016 Adjust font size:

Frequent reserve requirement ratio cuts will unleash massive liquidity and drive market interest rates lower, the central bank said on Friday.

Such moves will also strengthen expectations of monetary policy loosening, increase renminbi depreciation pressures, and lead to a decline in foreign exchange reserves, according to the People's Bank of China website.

The more liquidity the central bank injects, the stronger renminbi depreciation expectations will be, said the statement.

The central bank will closely monitor economic changes at home and abroad and create a "neutral and moderate" financial environment to keep the economy running smoothly.

In a separate report issued Friday, the central bank said it will continue the prudent monetary policy in the second half of the year, while maintaining an appropriate degree of flexibility and making timely pre-emptive adjustments. Endi