SHANGHAI/SINGAPORE, Feb 19 (Reuters) – China’s central bank left the policy rate unchanged on Sunday, as expected, as it refinanced maturing medium-term loans, as uncertainty over the timing of The Federal Reserve’s rate cuts limit Beijing’s room for maneuver in terms of economic policy.
Beijing is doing a delicate balancing act to sustain the economy at a time when signs of persistent deflationary pressure demand more stimulus measures. But any aggressive monetary move risks reigniting depreciatory pressure on the Chinese currency and capital outflows.
Now that investors are delaying the start of Federal Reserve monetary easing until at least mid-year from March, following the latest US data, traders and analysts are predicting that China could delay the rollout of imminent stimulus.
The People’s Bank of China (PBOC) said it would maintain the interest rate on 500 billion yuan ($69.51 billion) in medium-term loans (MLF) at a year to some financial institutions without changes with respect to the 2.50% of the previous operation.
Sunday’s operation was intended to “maintain the liquidity of the banking system reasonably comfortable,” the central bank said in an online statement.
In a Reuters poll of 31 market watchers, 22, or 71%, of all respondents expected the central bank to leave the cost of one-year MLF borrowing unchanged on February 18.
With 499 billion yuan in MLF loans maturing this month, the deal represented a net injection of 1 billion yuan into the banking system.
Chang Wei Liang, currency and credit strategist at DBS, said the stable MLF rate is due to “economic leaders’ preference to anchor the yuan and limit negative rate differentials with the US dollar.”
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Still, some investors and market watchers have raised bets on more monetary easing measures in the coming months to support the world’s second-largest economy after the central bank made a deep cut in bank reserves earlier this year. month.
In its latest economic policy implementation report, the PBOC says it will maintain a flexible outlook to boost domestic demand while maintaining price stability.
“We continue to expect two rounds of rate cuts in the first and second quarters, of 15 basis points each, in both open market operations and MLF rates,” said Ting Lu, chief China economist at Nomura. in a note prior to the loan transaction.
It added that the latest round of easing measures, including an earlier-than-planned cut in the reserve requirement ratio (RRR), “failed to stabilize market confidence.”
The central bank-backed newspaper Financial News reported on Sunday, based on comments from market observers, that the lending prime rate (LPR) could fall in the coming days, with more likely that the term will be reduced to five years.
“The reduction of the LPR to five years will help stabilize confidence, promote investment and consumption, and also support the stable and healthy development of the real estate market,” the newspaper said on its official WeChat account shortly after the decision on the MLF guy.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences mortgage pricing. The monthly fixing of LPR rates is scheduled for February 20.
($1 = 7.1929 Chinese yuan)
(Reporting by Winni Zhou and Tom Westbrook; edited in Spanish by José Muñoz)
2024-02-19 07:29:21
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