(Yicai Global) Jan. 16 -- China's central bank has injected CNY933 billion (USD139.2 billion) into the country's financial system to balance liquidity ahead of a peak of withdrawals before the Spring Festival while experts predict rate cuts as early as this quarter.
The People’s Bank of China conducted CNY779 billion of one-year medium-term lending facility loans with an unchanged interest rate of 2.75 percent, according to the PBOC's website. Some CNY700 billion of earlier MLF will expire tomorrow.
Moreover, the PBOC conducted a 14-day reverse repurchase operation of CNY74 billion (USD11 billion) today and a seven-day reverse repo operation of CNY82 billion, with interest rates of 2.15 percent and 2 percent, respectively. Meanwhile, CNY2 billion (USD300 million) of such short-term monetary policy tools expired.
The addition of MLFs will help curb the momentum of rising interest rates in the short term, and help banks provide credit support to the real economy at a lower cost, said Wang Qing, chief macro analyst of Golden Credit Rating. New yuan-denominated loans should surpass a record high of CNY4 trillion (USD596.8 billion) this month, he added.
There is still room for the PBOC to reduce its policy rate and reserve requirement ratio this year, according to analysts.
An interest rate cut or RRR decrease could happen in the first quarter, said Zhou Maohua, macro analyst of China Everbright Bank. At present, domestic demand is still insufficient and external demand is weakening, so it is necessary to guide financial institutions to further reduce the financing cost of the real economy and boost market confidence, Zhou added.
There is a high probability of cutting policy rates in March, according to Wen Bin, chief economist at China Minsheng Bank. There may even be two RRR cuts this year in the second and fourth quarters, Wen predicted.
With the weakening impact of the Covid-19 pandemic on the economy and the implementation of several policies to stabilize growth, Chinese people’s financing demand is expected to gradually pick up, and residents’ demand for consumer credit will recover earlier than that for home loans, Zhou concluded.
Editors: Dou Shicong, Emmi Laine, Xiao Yi