China maintains its medium-term policy rate, but markets anticipate more rises

China maintains its medium-term policy rate, but markets anticipate more rises ...

SHANGHAI, April 15 (Reuters) - Despite Beijing's calls for more monetary stimulus to mitigate an economic slowdown, China's central bank maintained its borrowing expenses for its medium-term policy loan for the third month in a row.

According to a website, the People's Bank of China (PBOC) said it was keeping the rate on 150 billion yuan ($23.52 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.6 percent from the previous operation.

Thirty-one percent of the 45 traders and analysts, or nearly 70% of all participants in a Reuters poll, predicted no change to the MLF rate.

Markets anticipate a substantial decrease in the amount of cash banks must be put aside as reserves, following the State Council or cabinet, calling on Wednesday for the use of such monetary tools.

Global investment banks like Citi expect such a decrease in reserve requirement ratios (RRR) to be implemented as early as Friday, with many anticipating additional easing measures in the pipeline.

Given the rapid headwinds facing China's economy, Julian Evans-Pritchard, a senior China economist, believes the coming RRR cuts will be the last alleviation.

"We continue to anticipate further 20 basis points of policy rate reduction this year, as well as a further increase in credit growth."

A recent rapid spread of COVID-19 cases has resulted in lockdowns in a dozen cities across the country, including the financial hub of Shanghai, expressing concern about broader economic losses.

According to analysts, policymakers will need to provide more stimulus to ensure the economy is on course to meet its growth goal of 5.5 percent this year.

According to a recent Reuters survey, China's economic growth is expected to fall to 5.0% in 2022 as a result of renewed COVID-19 outbreaks and a sluggish global recovery, which puts pressure on the central bank to ease policy even further.

The acquisition of 150 billion yuan worth of MLF loans ended on Friday, resulting in a zero net cash injection into the banking system.

According to an online statement, the central bank also allocated 10 billion yuan through a seven-day reverse repos.

($1 = 6.3775 Chinese yuan)

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