(Bloomberg) — China added enough medium-term funds into the financial system to maintain liquidity at existing levels as policy makers looked to strike a balance between supporting the economy without fueling asset bubbles.
The People’s Bank of China injected 500 billion yuan ($77.6 billion) through its medium-term lending facility, matching the 500 billion yuan maturing Friday. The outcome was in line with forecasts from five of the eight analysts surveyed by Bloomberg News. The MLF rate was left at 2.95%.
The PBOC’s decision comes as rising price pressures spur uncertainty over the need for further monetary easing, while concerns mount over possible contagion from the China Evergrande Group debt crisis. Financial regulators told some major banks late last month to accelerate approval of mortgages in the last quarter, according to people with knowledge of the matter.
“It still looks like half glass full, half glass empty story,” said Tommy Xie head of Greater China research at Oversea-Chinese Banking Corp. in Singapore. “The key conflict in the market right now is the rising hope for more easing due to increasing conviction of slowing growth versus more patient policy makers under the framework of cross cyclical policy.”
PBOC Governor Yi Gang told the Group of 20 central bankers’ meeting held Wednesday that China’s prudent monetary policy will be “flexible, targeted, reasonable and appropriate” so as to support high-quality economic development. He added that the country’s inflation is “moderate” overall.
Xie still sees room for the central bank to cut the reserve ratio requirement by 50 basis points this year.
China’s 10-year yields rose nearly two basis points to 2.97% while 10-year bond futures fell to the lowest since early July.
China also added 10 billion yuan via seven-day reverse repurchase agreements in its open-market operations, matching the amount maturing.
(Updates with OCBC comment in third paragraph.)
©2021 Bloomberg L.P.
PBOC Keeps Status Quo on Liquidity With Policy Loan Rollover
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