The PBoC announced on Friday that it will cut benchmark interest rates (lending and deposit) as well as the RRR ratio by a further 25bp.
On the latter there is once again a targeted element with an additional 50bp cut on the RRR for qualifying institutions. The timing as always is difficult but the rate/RRR cuts are not a total surprise although the 25bp move as opposed to an aggressive 50bp cut is likely intended to prevent adding to market concerns over the growth outlook for China.
We are in a period of more activism from central banks heading into year-end with the Norges Bank surprising last month, the ECB surprising yesterday with its signal of an interest rate cut and now the PBoC also choosing to loosen policy.
The period of surprises might not be over but those piling into risk will be hoping that the Fed does not surprise and signal that it still intends to hike rates this year.
The FOMC meeting next week will now be a key focus for the market.
