China Keeps Lending Rate Unchanged As Expected

China’s central bank left its medium-term lending facility rate unchanged on Wednesday as policymakers focus more on the currency stabilization.

The People’s Bank of China conducted the CNY 125 billion of one-year MLF facility. The rate on the MLF was retained at 2.5 percent.

The MLF usually acts as a guide to the loan prime rate fixing. As the MLF rate was kept unchanged today, the loan prime rates are set to be maintained this month.

The central bank also added CNY 2 billion via the seven-day reverse repos at an interest rate of 1.8 percent, which was also unchanged from the previous operation.

The PBoC said today’s action is intended to maintain reasonable liquidity in the banking system.

Earlier, ING economists said recent data revealed that low inflation, credit contraction, slowing money supply growth, and weak private sector investment present a strong case for rate cuts, suggesting that real interest rates remain too high and that reserve requirement ratio cuts are seeing diminished effectiveness.

As currency stabilization has been a key consideration this year, policymakers are likely to prefer for global rate cuts to begin before starting to cut rates, economists noted.

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