China’s central bank is set to “timely replenish” liquidity shortfalls before the Lunar New Year holiday, the state-owned China Securities Journal said on Wednesday.
The People’s Bank of China (PBOC) is likely to step up cash injections through open market operations into the banking system from the second half of the month.
That’s to meet rising demand for cash from both companies and households ahead of the week-long holiday, which starts from January 31, the official newspaper reported.
“Many financial institutions believe it is certain that the central bank will maintain reasonably ample liquidity,” the report said.
“[It] is likely to use various policy tools including reverse repos and medium-term lending facility (MLF) to meet institutions’ reasonable funding demand and to tide over the Lunar New Year holiday smoothly,” it added.
Although markets have reached consensus on higher liquidity offerings towards the long holiday, many market participants and analysts remain divided on whether the central bank would cut the interest rate on its MLF loans.
China cut its lending benchmark loan prime rate (LPR) for the first time in 20 months in December to prop up the slowing economy, although it remains wary of loosening conditions in the country’s highly leveraged property sector.
- Reuters with additional editing by Jim Pollard
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