China Likely To Hold MLF Rate On Monday, Cut Seen By Mid-Sept Before Fed | 8/21/2019 | Staff (Posted by) Level 4
SHANGHAI (Reuters) – China is likely to keep a key loan rate steady next week, but a cut is expected by mid-September after a policy review by the U.S. Federal Reserve, as Beijing steps up efforts to lower borrowing costs to support growth.

With global central banks shifting to a more accommodative monetary stance over recent months to fight growing economic pressure, traders and analysts say China will likely continue to provide stimulus as a trade dispute with the United States intensifies.

Analysts - Cut - People - Bank - China

Analysts say a cut in the People’s Bank of China’s (PBOC) medium-term lending facility (MLF), which reflects commercial banks’ long-term liability cost, will likely signal a reduction in the new revamped Loan Prime Rate (LPR), launched this week. However, they don’t expect a cut in the MLF rate on Monday when the next batch of loans mature.

The MLF now acts as a guide for the LPR, which is set on the 20th of each month.

LPR - Basis - Points - Tuesday - Weekend

The LPR was reduced by 6 basis points on Tuesday, following its weekend designation by the PBOC as the new lending benchmark for all fresh loans to households and businesses.

The central bank is “likely to cut the one-year MLF rate by around 10 basis points before September 20,” said Lu Ting, Greater China economist at Nomura in Hong Kong.

LPRs - Bp - September

“We thus expect LPRs to drop by around 10 bp on September 20.”

With a batch of 149 billion yuan ($21.01 billion) worth of one-year MLF loan due to mature on Monday, markets widely expect the central bank to keep the interest rate on hold before making the cut in the next rollovers.

LPR - China - Bank - August - Data

“The latest LPR has already been lowered. (China’s) central bank is likely to gauge August economic data and whether the Fed will cut its interest rate again in September before making the reduction,” said a trader at...
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