China’s central bank leaves key policy rate unchanged

SHANGHAI/SINGAPORE, May 15 (Reuters) – China’s central bank left a key policy rate unchanged when rolling over maturing medium-term lending facility (MLF) loans on Wednesday, in line with market expectations.

WHY IT’S IMPORTANT

The steady MLF rate shows the central bank’s focus on keeping currency stability, analysts say, even as an unexpected credit contraction in April added to the case for more policy stimulus to prop up the world’s second-largest economy.

The MLF loan operation also comes days ahead of the finance ministry’s scheduled sales of the first batch of 1 trillion yuan in ultra long-term special treasury bonds.

BY THE NUMBERS

The People’s Bank of China (PBOC) said it was keeping the rate on 125 billion yuan ($17.28 billion) in one-year MLF loans to some financial institutions unchanged at 2.50% from the previous operation.

In a Reuters survey of 32 market watchers, 84% of respondents expected the PBOC to leave the interest rate on MLF rate unchanged.

CONTEXT

China’s yuan has lost about 1.9% against a resurgent U.S. dollar so far this year, pressured by its relatively low yields versus other economies.

Source: REUTER