PBOC seen partially rolling over policy loans at steady rate – Reuters poll

China's central bank may drain cash next Monday via a partial rollover of maturing medium-term loans, while keeping policy rates steady, a Reuters survey showed, as ample market liquidity and a sliding yuan reduce the need for imminent policy easing.

The poll also mentioned, “But some still expect the People's Bank of China (PBOC) to ease banks' reserve requirements next month, to aid an economy hit by the COVID-19 pandemic and property market woes.”

Key findings

Most of the 27 participants in the poll conducted this week said they predicted the PBOC will partially renew 500 billion yuan ($69.55 billion) worth of policy loans on Monday. Only three expected a full rollover, while another three anticipated cash injections.

All of the poll respondents forecast that the interest rate on the one-year medium-term lending facility (MLF) will be kept unchanged, at 2.75%.

Traders point out that China's banking system is not short of cash - evidenced by the fact that market rates are lower than policy rates, curbing demand for central bank loans.

The scope for easing is also limited by a weak yuan, which has lost more than 11% against the dollar so far this year.

New bank lending in China nearly doubled in September from the previous month and far exceeded expectations.

But some participants still expect the PBOC to step up liquidity injection into the banking system, in a bid to accommodate fiscal expansion. 

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