For example:
For example, the deposit reserve ratio 1%. Suppose the bank has a deposit of 6,543.8+0,000 yuan, and it needs to take out 6,543.8+0,000 yuan as the deposit reserve, and the remaining 990,000 yuan can be used for lending.
Don't underestimate the deposit reserve ratio of 1%, because after the 990,000 loan is released, the people who get the loan, except the cash, will actually eventually flow back to the bank through various forms and channels and become deposits.
At this time, the bank has another 990,000 deposits. According to the ratio of 1%, the bank needs to withdraw 99,000 yuan as the deposit reserve, and the remaining 9800 100 yuan can be loaned again, and so on ... So don't underestimate the change of the deposit reserve ratio by a few tenths of a percentage point, which often means the change of several trillion equivalent market currencies.
Although RRR cut and interest rate cut are two main monetary policies, they are different.
Reducing RRR is intended to adjust the balance between supply and demand by releasing more funds, thereby reducing interest rates, and ultimately promoting the demand for funds, thus promoting economic development. ?
With the increase of capital supply, from MS 1 to MS2, the interest rate decreased and the capital demand eventually increased.
In an ideal situation, the increased demand for these funds will be invested in various fields one after another, thus promoting economic development.
Looking back, RRR reduction is intended to put funds into the market more intuitively by reducing the deposit and loan reserve ratio.
Although there is more money in the pool and it seems that the financing cost is very low, no one wants to take it.
Then the second step is to encourage people to use funds by reducing the interest on deposits/loans.
For example, when the deposit interest rate is 5%, more people will choose to deposit their money in the bank without risk.
However, when the deposit interest rate in Japan drops to zero or even negative interest rate, as long as the money is placed in the bank, it will become less and less, and people have to consider how to use the money. Loans are similar. When the loan interest 10%, only a few people may be willing to lend, but when it reaches 5%, more people will be willing to lend. ?
When the interest rate drops from IR 1 to IR2, the capital demand rises from MD 1 to MD2.