Strategists at UOB Group’s Global Economics & Markets Research review the latest decision by the PBoC.

Key Takeaways

“The People’s Bank of China (PBOC) left the 1Y Medium-Term Lending Facility Rate (MLF) rate unchanged at 2.85% on Tue, in line with the consensus forecast. The pause after the 10 bps cut to the 1Y MLF rate in Jan may have considered the stronger US Fed hike expectation as well as the strong rebound in Jan new aggregate financing. Nevertheless, the net CNY100 bn injection into the banking system with the 1Y MLF in Feb signals that the PBOC has stayed the path of monetary policy easing to shore up growth.”

“We expect the PBOC to guide the loan prime rate (LPR) lower in the coming MLF settings and maintain our call for the benchmark 1Y LPR to fall by another 15 bps to 3.55% by the end of 2Q22.”