UPDATE 1-China cbank rolls over maturing medium-term loans, keeps rate unchanged

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SHANGHAI, Oct 15 (Businesshala) – China’s central bank on Friday rolled out matured medium-term loans and kept its interest rates unchanged, betting policymakers will tighten monetary settings to support the economy amid risks from inflation. may need to be reduced.

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The People’s Bank of China (PBOC) said it has kept the rate of 500 billion yuan ($77.66 billion) one-year medium-term loan facility (MLF) loans to some financial institutions stable at 2.95%.

According to the statement, the cash injection rolled over to the same amount of matured loans, and PBOC attributed the move to “reasonably adequate keeping of the banking system’s liquidity.”

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“The result was in line with market expectations,” said ANZ chief China strategist Jing Zhaopeng.

“The central bank’s intention to control the scale of outstanding MLF loans showed a clear intention to avoid inflating the cost of bank liabilities,” he said.

Jing said targeted RRR cuts or targeted medium-term credit facility (TMLF) operations to deal with heavy tax payments are possible, which could reach 1.4 trillion yuan this month.

The PBOC made a surprise cut in banks’ reserve requirement ratio (RRR) in July, a sign that many investors believed the macroeconomic recovery had begun to lose steam.

Prime Minister Li Keqiang said this week that China has enough resources to meet economic challenges despite slow growth, and the government is confident of achieving its full-year development goals.

Li said China’s key economic indicators are within a reasonable range, although he acknowledged that growth in the third quarter had slowed due to a combination of factors.

Some market participants worry about rapid factory-gate inflation.

“For policymakers in Beijing, they have good news on the export front, and they are still reluctant to shield developers who are in trouble. And, with more liquidity injected, we think the impact will be smaller. ,” said Lu Ting, Nomura’s chief China economist.

“The real issue is that transmission channels are blocked because of Beijing’s unprecedented restrictions on the asset sector and energy consumption, as well as its zero-COVID policy,” Lu said this week.

MLF loans worth a total of 1.95 trillion yuan are due to expire in the remainder of this year.

The central bank injected another 10 billion yuan worth of seven-day reverse repos into the banking system that day, offsetting the same amount of a short-term liquidity instrument scheduled for Friday. ($1 = 6.4380 Chinese Yuan)

Reporting by Winnie Zhou and Andrew Galbraith Editing by Mr Navratnam and Sam Holmes


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