China’s central bank delays one-year loan operation again
CHINA’S central bank announced it will inject one-year liquidity to domestic lenders on Sep 25, marking another delay amid a broad overhaul of its policy toolkit.
The People’s Bank of China (PBOC ) will renew the medium-term lending facility (MLF) funds maturing Sep 18 later this month, according to a statement on Wednesday (Sep 18). It postponed the operations in August to around the 25th from its previous practice of around mid-month. In July, the central bank announced an MLF rate cut towards the end of the month.
Meanwhile, the central bank injected 80.7 billion yuan (S$14.7 billion) of liquidity on a net basis via the seven-day reverse repurchase notes.
The PBOC is revamping its policy framework in a shift that could allow it to operate more like global peers and influence market borrowing costs more effectively. It’s been downplaying the role of the MLF as a key rate while transitioning to using the seven-day reverse repo notes as the main policy lever to deliver a clearer signal.
The MLF rate was last lowered on Jul 25 by the most since 2020, the latest step in a string of rate reductions to improve the economy’s faltering momentum.
China’s slowdown has been alarming enough to threaten this year’s growth target of around 5 per cent. Industrial output expanded in August at a weaker pace for the fourth month, the longest stretch since September 2021, while consumption and investment decelerated more than economists had expected.
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Risks to the outlook are increasing as deflationary pressure become more entrenched in a sign of weak domestic demand, even though export strength continued to hold up. The central bank signalled in a rare statement after disappointing credit data for August that fighting deflation would become a higher priority, and indicated more monetary easing ahead. BLOOMBERG
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