rates and the depreciation pressure on the yuan may also constrain the PBOC's policy rate cut,' she said.
'We do not expect the central bank to significantly cut policy rates, as most policymakers do not believe policy rates are the main reason for the current economic weakness,' said Wang Tao, chief China economist at UBS. However, markets believe sustained downward pressure on the yuan currency is limiting room for policymakers for more aggressive monetary easing.Ĭhina recently stepped up its fiscal stimulus with a newly approved 1 trillion yuan of sovereign bond issuance, at a time when the sputtering economic recovery also calls for more liquidity support, market watchers said.Īll 31 market participants polled this week expected the People's Bank of China (PBOC) would inject fresh funds to exceed the maturing 850 billion yuan ($116.53 billion) worth of one-year medium-term lending facility (MLF) loans on Wednesday.Īmong them, 28, or 90% of all respondents, predicted no change to the borrowing cost CNMLF1YRRP=PBOC, which currently stands at 2.5%, while the remaining three projected a marginal interest rate cut. While parts of China's economy are starting to show signs of improvement after a mid-year slump, the property market and exports continue to contract.
