PBOC Keeps Medium-term Policy Rate Unchanged

China's central bank kept borrowing costs unchanged for a third straight month as expected on Friday, although markets expect other monetary stimulus measures to be forthcoming from Beijing.

The People's Bank of China (PBOC) said in an online statement it was keeping the rate on 150 billion yuan worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.85 percent to keep banking liquidity “reasonably ample".

On Wednesday, the State Council called for the timely use of monetary tools such as a reduction in the amount of cash banks must set aside as reserves. Global investment banks including Citi expect such a reserve requirement ratio (RRR) reduction could be delivered as early as Friday.

"We doubt the forthcoming RRR cut will be the last easing move either," said Julian Evans-Pritchard, senior China economist at Capital Economics.

"We continue to anticipate another 20 basis points of policy rate cuts this year and a further acceleration in credit growth."

The recent fast spread of Covid-19 cases has induced lockdowns in cities across the mainland, raising concerns over disruptions to economic activity. The central government has indicated that it is ready to use policy measures to ensure the economy stays on course for growth of around 5.5 percent. (Reuters)