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Highlights
- People's Bank of China keeps policy rate unchanged this month.
- Previous rate cuts aimed at boosting economic activity.
- Market focus remains on further potential stimulus moves.
China’s central bank has decided to keep its key policy rate steady this month, following an earlier record reduction in funding costs. This cautious approach suggests that authorities are being mindful of the pace at which they provide monetary stimulus to support economic recovery.
The People's Bank of China (PBoC) held the interest rate on its medium-term lending facility at 2%, while also withdrawing a net 89 billion yuan ($US12.5 billion) in October, according to an official statement released on Friday. This decision came as no surprise to most economists, with 14 out of 15 experts surveyed by Bloomberg predicting that the central bank would maintain the current rate.
Last month, Beijing introduced an unprecedented reduction in the cost of this funding facility, lowering it by 30 basis points. This marked a significant effort to stimulate economic growth, though it is now being gradually replaced by a shorter-term rate as the primary tool for guiding the market, part of a broader policy overhaul by the monetary authorities.
Investors and traders are keeping a close eye on any potential new stimulus measures from the Chinese government. The September move by PBoC Governor Pan Gongsheng, which included significant cuts to both interest rates and the reserve requirement ratio, raised expectations for more intervention aimed at maintaining the nation's growth target of around 5% for the year.
These measures are designed to ensure that banks have the necessary funds to lend, supporting the broader goal of economic stability. China’s financial markets are closely watching further developments from the PBoC, as the nation continues to seek a balance between sustaining growth and managing inflation.
