Shanghai: China’s central bank kept the borrowing cost of its medium-term policy loan unchanged for the third consecutive month as expected on Friday, despite Beijing’s call for more monetary stimulus to ease the economic slowdown.
The People’s Bank of China (PBOC) said it is keeping the rate of 150 billion yuan ($23.52 billion) worth of one-year medium-term loan facility (MLF) loans to certain financial institutions unchanged at 2.85% from previous operations. “Maintain adequate liquidity in the banking system”, according to an online statement.
Thirty-one out of 45 traders and analysts, or nearly 70% of all participants in a Reuters poll, predict no change in the MLF rate.
Instead, markets are increasingly anticipating an imminent reduction in the amount of cash banks should set aside as reserves, state CouncilOr the Cabinet, called on Wednesday for the timely use of such monetary instruments.
Global investment banks, including Citi, expect such a reserve requirement ratio (RRR) reduction to be granted as early as Friday, with many still expecting more easing measures.
“We suspect that the upcoming RRR cut will be the last easing step given the serious constraints facing China’s economy,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
“We anticipate a 20 basis points cut in policy rates this year and a further pick-up in credit growth.”
The recent rapid spread of COVID-19 cases has prompted lockdowns in a dozen cities across the country, including the financial hub of Shanghai, raising concerns over widespread disruptions to economic activity.
Analysts say this means policymakers will need to provide more stimulus to ensure the economy reaches this year’s growth target of around 5.5%.
China’s economic growth is likely to slow to 5.0% in 2022, a latest Reuters poll showed, amid renewed COVID-19 outbreak and weak global recovery, pressure on the central bank to further ease policy.
The operation resulted in zero net cash injection into the banking system, with 150 billion yuan of MLF loans maturing on Friday.
According to an online statement, the central bank also injected 10 billion yuan through a seven-day reverse repo, while keeping the cost of borrowing unchanged at 2.1%.
The People’s Bank of China (PBOC) said it is keeping the rate of 150 billion yuan ($23.52 billion) worth of one-year medium-term loan facility (MLF) loans to certain financial institutions unchanged at 2.85% from previous operations. “Maintain adequate liquidity in the banking system”, according to an online statement.
Thirty-one out of 45 traders and analysts, or nearly 70% of all participants in a Reuters poll, predict no change in the MLF rate.
Instead, markets are increasingly anticipating an imminent reduction in the amount of cash banks should set aside as reserves, state CouncilOr the Cabinet, called on Wednesday for the timely use of such monetary instruments.
Global investment banks, including Citi, expect such a reserve requirement ratio (RRR) reduction to be granted as early as Friday, with many still expecting more easing measures.
“We suspect that the upcoming RRR cut will be the last easing step given the serious constraints facing China’s economy,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
“We anticipate a 20 basis points cut in policy rates this year and a further pick-up in credit growth.”
The recent rapid spread of COVID-19 cases has prompted lockdowns in a dozen cities across the country, including the financial hub of Shanghai, raising concerns over widespread disruptions to economic activity.
Analysts say this means policymakers will need to provide more stimulus to ensure the economy reaches this year’s growth target of around 5.5%.
China’s economic growth is likely to slow to 5.0% in 2022, a latest Reuters poll showed, amid renewed COVID-19 outbreak and weak global recovery, pressure on the central bank to further ease policy.
The operation resulted in zero net cash injection into the banking system, with 150 billion yuan of MLF loans maturing on Friday.
According to an online statement, the central bank also injected 10 billion yuan through a seven-day reverse repo, while keeping the cost of borrowing unchanged at 2.1%.