China’s central bank held the interest rate on its one-year policy loans at 2.5 per cent on Sunday, as uncertainties about the Federal Reserve’s easing timing limited Beijing’s monetary policy options, Reuters reported.
Investors are now expecting the Fed to delay monetary easing until at least the middle of the year, rather than March, due to the latest U.S. data. As a result, traders and analysts anticipate that China may also delay rolling out imminent stimulus.
A Reuters poll showed that 71 per cent of respondents expected the central bank to keep the borrowing cost of the one-year MLF loans unchanged.
The People’s Bank of China (PBOC) said it would keep policy flexible to boost domestic demand while maintaining price stability.
However, analysts expect two rounds of rate cuts in Q1 and Q2, with 15 basis points each to both the open market operations (OMO) and MLF rates.
Beijing is trying to support the economy while facing deflationary pressure, but aggressive monetary moves could lead to currency depreciation and capital outflows, Reuters added.
