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China’s central bank partially rolled over maturing medium-term policy loans and kept the interest rate unchanged for a third straight month on Tuesday, suggesting policymakers remain wary of stoking further yuan weakness by easing monetary conditions.
A global wave of interest rate increases have limited Beijing’s ability to support a wobbly economy, with a falling yuan currency raising the risks of large-scale capital outflows as investors seek higher yield premiums elsewhere – particularly those offered by U.S. bonds.
The People’s Bank of China (PBOC) said it was keeping the rate on 850 billion yuan ($120.21 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions at 2.75 percent, unchanged compared with the previous operation.
“Stabilizing the currency market still occupies an important place in the macro policy agenda,” said Wang Qing, chief macro analyst at Dongfang Jincheng.
“Keeping policy rates stable will help curb widening interest rate differentials between China and the United States and stabilise FX market expectations.
