How does RRR cutting work?

RRR reduction refers to the behavior of the central bank to reduce the deposit reserve ratio of commercial banks.

First of all, we must understand that the business model of banks is mainly to earn deposit and loan spreads and lend depositors' money to people in need. But banks can't lend all their deposits. What if someone comes to withdraw money? In this way, there is a deposit reserve.

Assuming that the deposit reserve ratio is 20%, only 800,000 of the 6.5438+0 million deposits can be used for lending?

The central bank affects the money supply and liquidity by adjusting the deposit reserve ratio.

If the central bank reduces the deposit reserve ratio, the deposit reserve of commercial banks will decrease and the disposable funds of banks will increase, thus increasing the ability of banks to lend to the outside world and stimulating economic growth.

Therefore, RRR is a common monetary policy tool, which is usually used to stimulate economic growth or alleviate the downward pressure on the economy.

What is the impact of RRR interest rate cuts on the stock market?

RRR interest rate cuts usually have a positive impact on the stock market, because it can improve the liquidity and capital utilization efficiency of banks and promote the financing support of banks to the real economy. This will lead to an increase in funds in the market, which will push up the stock price.

In addition, RRR cuts may also lead to a drop in interest rates, thus enhancing the investment attraction of the stock market. As banks gain more liquidity, they may lower the loan interest rate, which will help enterprises reduce financing costs and improve profitability, thus enhancing the investment attraction of the stock market.

In short, RRR cut is usually regarded as a positive factor, which may have a positive impact on the stock market.