China's central bank held key policy rates steady on Wednesday, a move that could preface a hold on benchmark lending rates later this month.
The People's Bank of China injected 125 billion yuan ($17.28 billion) worth of liquidity via the medium-term lending facility, which charges banks an interest rate of 2.5%. The rate was unchanged from last operation.
The MLF is a tool the central bank uses to lend to commercial banks and acts as a guide for the benchmark loan prime rate, which is tied to mortgages and other loans.
Wednesday's decision comes as sentiment toward China's economy has turned cautiously upbeat thanks to better-than-expected exports and consumer inflation figures for April.
While continued weak spots like in the property sector are tempering optimism toward the world's second-largest economy, other indicators due Friday are expected to show improvement after a sharp slowdown in March, according to a poll of analysts by The Wall Street Journal.
Many analysts still think more policy action is needed to help cement recovery momentum. April's Politburo meeting has fanned hopes that support is coming.
The central bank on Wednesday also offered CNY2 billion funds to banks at an interest rate of 1.8%, also the same as in the earlier operation.
The hold on the MLF rate may indicate that the benchmark loan prime rate will be the same as last month, as lenders are asked to price loans with MLF rates. The central bank will release the LPR rate next Monday.
Economists think Beijing could start easing its monetary stance soon, possibly by cutting requirements on the amount of deposits banks have to set aside in a bid to provide liquidity for commercial banks to purchase government bonds.
Earlier this week, China's finance ministry announced a detailed plan to issue ultra-long special treasury bonds, with the first batch set to be issued on Friday.
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(END) Dow Jones Newswires
05-14-24 2206ET
