China's PBOC may be persuaded to cut key policy interest rates in Q2

Their remarks were in response to PBOC's OMO that infused 200 billion yuan ($31.36 billion) into the financial system through a one-year medium-term lending facility (MLF) at an unchanged interest rate of 2.85 per cent.

In addition, seven-day reverse repos at an unchanged yield of 2.1 per cent injected 10 billion yuan into the system.

The PBOC last cut the one-year MLF interest rate by 10 basis points to 2.85 per cent in January, after which economic activity showed more signs of stabilization, according to Government-controlled media in the country..

The National Bureau of Statistics said recently that industrial output, a key economic gauge, expanded by 7.5 per cent year on year in the first two months compared with a 4.3 per cent rise in December last year.

PBOC data, however, showed demand from the real economy may have remained sluggish. Renminbi loans rendered to the real economy expanded by 908.4 billion yuan last month, 432.9 billion yuan less than the increase in February 2021.

Specifically, new mid-to-long-term loans to households even registered a rare decline of 45.9 billion yuan in February, reflecting the weakness of the property sector, PBOC data showed.

The State Council's recent executive meeting encouraged financial institutions to roll out specific measures to make substantive progress in making financing truly accessible to micro, small and medium enterprises  and reducing overall financing costs.

ALCHEMPro News Desk (DS)