Image: Reuters Berita 24 English - On Wednesday, China 's central bank kept its medium-term policy rate constant for the fifth month in ...
 |
| Image: Reuters |
Berita 24 English - On Wednesday, China's central bank kept its medium-term policy rate constant for the fifth month in a row, as expected, with observers claiming that the Federal Reserve of the United States' aggressive rate hikes were pressuring Beijing's hand.
While Beijing has promised to increase stimulus measures to support the broad economy hit by COVID-19 shocks, it is worried of a widening monetary policy divergence between China and other major economies, which might lead to yuan devaluation and capital outflows.
The People's Bank of China (PBOC) said that the rate on 200 billion yuan ($29.68 billion) in one-year medium-term lending facility (MLF) loans to some financial institutions will remain unchanged at 2.85 percent.
According to an online statement from the PBOC, the cash injection was made to "maintain banking sector liquidity sufficiently ample."
According to the most recent Reuters poll, thirty of 31 poll respondents predicted no change in the interest rate on the one-year MLF rate.
"In terms of a more aggressive Fed tightening, the PBOC was maintaining the status quo," said Xing Zhaopeng, senior China analyst at ANZ.
However, Xing believes the central bank will start monetary easing in the third quarter of this year by lowering banks' reserve requirement ratio by 50 basis points.
Financial market volatility has paved the way for a larger-than-expected three-quarter-percentage-point interest rate hike at the Federal Reserve's policy meeting this week.
The Chinese central bank also said that it injected 10 billion yuan via seven-day reverse repos while maintaining borrowing rates at 2.1 percent.
(1 US dollar = 6.7395 Chinese yuan)
