China’s central bank left a key interest rate unchanged, keeping a lid on a bond frenzy as it stays patient in supporting the economy. The People’s Bank of China kept the rate on its one-year policy loans, or the medium-term lending facility, at 2.3 per cent, after a slashing the rate by 20 basis points in July. Meanwhile, the central bank withdrew a net 101 billion yuan from the banking system this month, as 401 billion yuan of the loans expired on August 15.
The net withdrawal is “indicating that the PBOC is keeping reasonably ample and balanced liquidity and preventing excessive liquidity in order to curb the bond bulls,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. The decision underscores Beijing’s cautious approach in supporting the economy, even as China reported a rare contraction in bank loans amid weak demand.
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