Liquidity trap is a hypothesis put forward by Keynes, which means that when the interest rate in a certain period drops to the lowest level, the elasticity of money demand will become infinite, that is, no matter how much money is added, it will be stored by people. When there is a liquidity trap, no matter how loose the monetary policy is, it can't change the market interest rate and the monetary policy becomes invalid.

The effect of reducing RRR is not obvious. In the current economic environment, people are more inclined to save. Even if the interest rate is 0, residents will consider the pressure of future income reduction.

Banks will be more conservative and will only lend to state-owned enterprises, which will not stimulate economic growth because it will not stimulate consumption growth.

On October 4th, 65438/kloc-0, the central bank announced that the People's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 1 percentage point, including 0.5 percentage points in 20 19, 15 and 65438+25 years respectively. At the same time, the medium-term loan facility (MLF) due in the first quarter of 20 19 will not be extended. According to the data of the central bank, the RRR cut will release about 65,438+0.5 trillion yuan, plus the funds released by the upcoming targeted medium-term loan business and the dynamic evaluation of the targeted reduction of the deposit reserve ratio for inclusive finance. After considering the fact that the medium-term loans due in the first quarter of this year will not be extended, it will release a net long-term fund of about 800 billion yuan.