UPDATE 1. China Central Bank Provides 600 Billion RMB in Medium-Term Loan, Rate Unchanged 16th Month

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SHANGHAI, August 16. (Reuters) – China’s central bank on Monday injected billions of yuan into the financial system in medium-term loans, while keeping the interest rate unchanged for the 16th consecutive month.

The People’s Bank of China (PBOC) kept its RMB 600 billion ($ 92.64 billion) medium-term lending (MLF) rate to some financial institutions at 2.95% from previous operations.

The central bank said the lending operation was intended to “fully meet the demand for liquidity from financial institutions” while keeping the fund’s terms “reasonable.”

The move “took into account the fact that financial institutions could use some of the funds exempted from the RRR cut in July to repay MOF loans due this month,” the NBK added.

In the same online statement, the central bank said the transaction had been pushed back on Monday by 700 billion yuan on MLF loans maturing on Tuesday.

In July, the NBK unexpectedly lowered banks’ RRRs, highlighting policy stability in its second quarter monetary policy report, dampening market expectations for more aggressive monetary policy easing, including lower interest rates.

But some analysts and economists have argued that the widening of Delta Option outbreaks across the country, heavy rains and floods, and a slowdown in the economy, as evidenced by recent data, all require additional mitigation.

Meanwhile, some bond traders said the huge amounts of MLF maturity could impact cash fortunes for the rest of this year. Reuters calculates, based on official figures, that MLF loans totaling 3.05 trillion yuan will expire in the fourth quarter of this year.

The central bank also injected another 10 billion yuan of seven-day reverse repos into the banking system. ($ 1 = RMB 6.4768) (Reporting by Vinnie Zhou and Andrew Galbraith; editing by Sri Navaratnam and Stephen Coates)

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