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Economy · Policy
Central banks worldwide set to boost liquidity as global recession looms
2019/06/10 06:05:21
China's PBOC, Central Banks, RRR cuts, China Monetary policies, China's GDP

Jun 10, 2019 (China Knowledge) - Analysts are expecting central banks across the world to lower the cost of borrowing, bringing in an era of cheap financing. This is evident when central banks worldwide are lowering interest rates to stimulate slowing growth amid a global trade war that will potentially push the world economy into recession.

A global trade war is threatening the world economy to fall into recession, especially when the world’s biggest economies continue to escalate trade war tension. The latest round of trade tension came when the US raised tariffs on USD 200 bln worth of Chinese goods to 25 percent from 10 percent. China retaliated by raising tariffs on USD 60 bln worth of US imports from June 1.

Market outlook remains gloomy when analysts, including the International Monetary Fund, have lowered China’s Gross Domestic Product (GDP) growth forecast for this year. Meanwhile, the American business community stays cautious about the US entering recession next year, potentially dragging the world economy with it.

Morgan Stanley is expecting China to further embark on its monetary policies of reducing banks’ reserve requirement ratio (RRR) to boost liquidity into the banking system, while Indian, Indonesian, South Korean, Malaysian and the Philippines central banks are all expected to cut rates between one to two times this year.

This year, the Chinese central bank has cut its RRR by 300 basis points, injecting RMB 280 bln in liquidity. The PBOC is focusing on giving extra support for small and medium enterprises which accounts for the country’s 60 percent GDP and 80% of jobs.

Similar statements were made by the Swiss investment bank, UBS. They are expecting another 100 to 200 basis points of broad-based RRR cuts over the rest of 2019, accompanied by lending facilities and other new tools.

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