Pboc Keeps Policy Rate Unchanged

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Pboc Keeps Policy Rate Unchanged

Pboc Keeps Policy Rate Unchanged At 2.50%

The Public Bank of China (PBoC) made no changes to the interest rate policy at its recent meeting. This decision was made as the central bank rolled over MLF loans on Wednesday.

According to experts, no change in the MLF rate is a sign that the central banks want to keep the currency stable. However, it is also a fact that credit contraction was seen in April which also raises the need for additional policy stimulus for the Chinese economy.

Pboc To Continue Supporting The Economy

The timing of the MLF loan operation by the PBoC is also crucial as it has come only days before the upcoming sale of treasury bonds worth 1 trillion yuan.

For now, the 1-year MLF loans will have an interest rate of 2.50%, similar to the earlier value. It is also important to note that the MLF loans for which the rate is maintained are worth around $17.28 billion.

The decision by the PBoC was mostly expected by the market players as around 84% of the survey respondents have pointed out this outcome.

Meanwhile, the Chinese Yuan is down by 1.9% against the greenback in 2024, mainly due to the low yields. If we look around, most of the developed countries actually have higher yields, which is leading to CNY weakness.

Member of the ruling party in China has also hinted at how they will continue to support the economy via fiscal and monetary policies. This also includes rate cuts and changes to the RRR.

According to ING, the Chinese economy is facing credit contraction, weak money supply growth, and low inflation. All of this is a sign that the real interest rate in China is still too high. Meanwhile, the RRR cuts by the PBoC appear to have little to no effect.

Amidst all of this, one key factor that remains in the highlight is currency stabilization. That's a key reason why the PBoC is waiting for the rest of the world to cut rates but doing it at home.

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