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ShreeMetalPrices: China’s central bank increases liquidity support with rolling over medium-term loans.


China’s central bank on Monday increased liquid support for the economic by renewing matured medium-term policy loans with larger cash offers for the fifth consecutive month while maintaining the interest rate where it was expect.

In order to give the economic recovery more pace. The somewhat increased cash injection would help fill liquidity gaps caused by forthcoming tax payment by banks and enterprises.

The People’s Bank of China (PBOC) said that it will maintain the interest rate on mid-term lending facility (MLF) loans to selected financial institutions in the amount of 170 billion yuan ($24.75 billion) at 2.75%, unchanged from the previous transaction.

The goal of Monday’s operation, according to a statement posted online by the central bank, was to maintain “reasonably ample banking system liquidity.”

In a survey of 29 market observers conducted last week, 29 predicted that the MLF rate would not change. While 23 predicted that fund offerings would be longer than their maturities.

The exercise led to a net 20 billion yuan infusion of new funds into the banking system, replacing MLF loans worth 150 billion yuan that were due to expire this month.

As much as 1.7 trillion yuan may be withdrawn from the financial system. According to some brokerages, which might assist banks get through the mid-April quarterly tax payment deadline.

Liquid support

The recovery from the COVID-19 collapse is on pace. According to certain market analysts and traders, and the likelihood of an interest rate cut has decreased as a result of stronger-than-expected economic statistics, including exports, credit growth. And a decreasing decline in property investments.

The PBOC probably won’t see the necessary to increase broad-based easing. Especially considering that credit demand has already begun to improve. According to economists at Capital Economy in a note.

“In March, it reduced the reserve requirements ratio (RRR), but our interpretation was that this was done to provide comfort to banks. Whose revenue margins were under pressure.

On Tuesday, China is expect to release data on its first-quarter GDP and activity indexes.

In March, the PBOC reduced the reserve requirement ratio for banks for the first time this year. In its most recent quarterly meetings of its monetary policy committee. It promised to keep plenty of liquidity, stabilise growth & employment, and concentrate on raising domestic demand.

In addition, the PBOC added twenty billion yuan through 7-day reversed repos while maintaining the borrowing fee constant at 2.00%.