PLAN 1-China’s central bank injects new money through medium-term loans, interest rates unchanged

(To be written with researcher citations)

SHANGHAI, Jan 16 (Reuters) – China’s central bank stepped up its liquidity injection on Monday, offering more loans to some banks through its long-term lending facility – a move that coming before the New Year when companies and families often seek more money. .

The move also comes amid expectations that the Chinese government will do more to stimulate the country’s COVID-ravaged economy. However, the central bank kept the loan interest rate unchanged for five months straight.

The Bank of China (PBOC) said it has offered 779 billion yuan ($116 billion) worth of loans through its one-year lending facility (MLF) at an interest rate of 2.75%.

With 700 billion yuan worth of MLF loans set to expire this month, the move provided 79 billion yuan of new financing.

The move was intended to keep liquidity in the bank “adequate” and fully meet cash flow needs, the central bank said in an online statement.

In a poll of 25 market observers last week, the majority of participants expected the central bank to maintain the current balance in the bank through action.

China’s central bank has pledged to take more measures to boost market confidence and increase support for manufacturers and small businesses, said Xuan Changneng, deputy governor of the PBOC on Friday. because of the hope that the economy will grow this year.

The MLF rate usually serves as a guide to the lending rate (LPR), which will be set on Friday.

Frances Cheung, rates strategist at OCBC Bank, saw some trends in Monday’s move regarding the LPR, adding that the LPR could be cut by 5 to 10 basis points, especially five last year the foundation of government policies in the property sector.

The five-year LPR is affecting mortgage rates and the government has recently launched a number of incentives to help the distressed housing sector.

Barclays analysts said in a client statement that they expect the government to extend monetary policy support and the PBOC to ease with more favorable credit policies to stabilize credit growth. “We think the 10 basis-point (bp) cut in policy in Q1 cannot be canceled due to weak demand in the COVID wave,” they said.

Investors are also eagerly awaiting the release of China’s gross domestic product (GDP) and other key economic indicators due paid on Tuesday.

Analysts polled by Reuters expect China’s economic growth to grow by just 2.8% in 2022 amid the nationwide lockdown, below the official expectation of 5.5 %. But they predicted a recovery of 4.9% growth this year, but not sustained until 2024.

The central bank also issued 156 billion yuan worth of short-term financing on Monday, including 82 billion yuan of seven-day refinancing and another 74 billion yuan through 14- day tenor, said the statement.

($1 = 6.7010 yuan) (Reporting by Winni Zhou and Brenda Goh; Editing by Kim Coghill and Edwina Gibbs)

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