A recent announcement from the China’s central bank outlining a new Macro Prudential Assessment (MPA) system indicates that the official reserve requirement ratio for commercial banks will increasingly be used to enforce financial stability instead of as a tool to manage liquidity, Bloomberg reported. Ma Jun, chief economist of the People’s Bank of China research bureau, said in a commentary Wednesday that the bank should set reserve requirements with an eye toward short-term interest rate stability, suggesting open market operations and other facilities as other ways to manage rates. Central bank researchers have previously advocated establishing an interest-rate target akin to that of the US Federal Reserve.
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