The People's Bank of China (PBOC) has reaffirmed its commitment to maintaining yuan stability, while simultaneously addressing the dual challenge of ensuring adequate liquidity for the country's economy and stabilizing the yuan against anticipated sustained U.S. rate increases. This comes in light of recent economic fluctuations and the conclusion of the Federal Reserve's hiking cycle.
On Friday, PBOC's monetary policy leader, Zou Lan, emphasized the bank's readiness for sudden economic changes. He noted an uptick in new loans driven by accelerated real estate development and mortgage lending in September. Lan also pledged to uphold previous policies to manage any potential economic volatility.
Despite signs of stabilization in China's economy, the world's second-largest, experts such as those from TF Securities have suggested that government intervention might be necessary to stimulate recovery. They caution that significant monetary stimulus could further devalue the already weak yuan.
Market watchers anticipate that PBOC will maintain the interest rate on one-year Medium-term Lending Facility (MLF) loans at 2.5% for the monthly rollover. The majority predict PBOC's fund offerings will exceed the maturing 500 billion yuan ($77.6 billion), with an estimated injection of 100-200 billion yuan ($15.5 - $31 billion) in fresh funds.
However, ANZ senior strategist Xing Zhaopeng believes that policy rate cuts may be a viable option in Q4 due to weak domestic demand and a deepening property crisis, which could widen the yield gap with the United States.
In an MNI interview with a Monetary Policy Committee member, discussions regarding capital outflow were undertaken, highlighting PBOC's comprehensive approach to managing current economic challenges.
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