China cbank injects 500 billion yuan through medium-term loans without changing rates – Reuters statement

SHANGHAI (Reuters) – China’s central bank introduced funds into the financial system through medium-term loans on Wednesday, keeping interest rates unchanged for 20 consecutive months.

The People’s Bank of China (PBOC) said it is maintaining a 500 billion yuan ($ 78.5 billion) one-year medium-term loan rate (MLF) at 2.95%.

The PBOC’s decision to lower its bank reserve ratio (RRR) ratio also went into effect on Wednesday, releasing 1.2 trillion long-term Yuan funds, the central bank said in a network note.

“The larger-than-expected injection confirms that PBOC will have ample liquidity next year,” said Xing Zhaopeng, senior senior strategist at ANZ China.

“The unmoved rate indicates a cautious tone of monetary policy. However, in the countercyclical implementation, the authorities will remain open if necessary to reduce the rate. We believe that the PBOC will be in the form of a wait and see.”

Some market analysts and traders said they see the possibility of lowering the reference lending rate (LPR) next Monday, despite the stable MLF rate.

“The one-year LPR rate may drop 5 basis points (bps),” analysts at Goldman Sachs (NYSE 🙂 said in a note to previous clients.

“According to the PBOC, the July and December RRR reductions together reduce bank costs by 28 billion yuan. According to our estimates, it is enough to reduce the annual LPR rate by 5 bps. At the same time, we do not expect a 5-year LPR rate or policy. rates such as OMO and MLF rates “.

The central bank also injected another 10 trillion yuan into the seven-day reverse income banking system, offsetting the same amount of those short-term liquidity transactions on Wednesday.

($ 1 = 6.36671 yuan)