THE central bank said Friday it was cutting the amount of cash that banks must hold as reserves for the third time this year, releasing 900 billion yuan (US$126.35 billion) in liquidity to shore up the flagging economy.

Analysts had expected China to announce more policy easing measures soon.

The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) by 50 basis points (bps) for all banks, with an additional 100 bps cut for qualified city commercial banks. The RRR for large banks will be lowered to 13 percent.

The PBOC has now slashed the ratio seven times since early 2018. The size of the latest move was at the upper end of market expectations, and the amount of funds released will be the largest so far in the current easing cycle.

The broad-based cut, which will release 800 billion yuan in liquidity, is effective Sept. 16. The additional targeted cut will release 100 billion yuan, in two phases effective Oct. 15 and Nov. 15.

“The move shows policymakers are increasingly worried but it’s far from enough to stabilize the economy,” said Larry Hu, head of China economics at Macquarie Group.

The latest move to spur bank lending followed a Cabinet meeting Sept. 4 that pledged to implement both broad and targeted cuts in the RRR “in a timely manner.”

The PBOC said it will maintain a prudent monetary policy and avoid flood-like stimulus, while increasing counter-cyclical adjustments and maintaining reasonable and abundant liquidity.

The central bank is also widely expected to cut one or more of its key policy interest rates in mid-September — for the first time in four years — as it works to reduce corporate funding costs.

“I think it’s very likely they will cut the LPR (loan prime rate) by about 5-10 bps later this month. I also expect another RRR cut of 50 bps by the end of this year,” Hu said.(SD-Agencies)