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China Central Bank Holds Rates Constant

China’s central bank has decided to leave a key policy rate for maturing medium-term loans unchanged, as was expected by markets. Interest on the People’s Bank of China’s one-year medium-term lending facility (MLF) loans will thus remain at 2.5%.

This comes as uncertainties rise around the timing of the Federal Reserve’s interest rate cuts. In addition to the Federal Reserve’s actions, it remains uncertain whether inflation will once again rebound, thereby pushing the need for further inflation measures. Initially expected in March, the Fed is now expected by analysts to introduce interest rate cuts around May.

499 billion yuan worth of MLF loans are set to expire this month, with a net 1 billion yuan set to be injected into the Chinese economy as a result of rates remaining constant. The People’s Bank of China’s decision was not a surprising one, with 22 of 31 market watchers polled by Reuters, or 71%, all expecting rates to remain unchanged.

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