China’s liquidity boost cheers markets with PBOC’s massive fund injection; economists eye rate cut

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Also Read: PBOC's bold move: Injects $112 billion lifeline amid economic challenges The People's Bank of China (PBOC) said it was keeping the rate on 1.45 trillion yuan ($203.97 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.50% from the previous operation. With 650 billion yuan worth of MLF loans set to expire this month, the operation resulted in a net 800 billion yuan fresh fund injection into the banking system in December, booking the biggest monthly increase on record, Reuters reported.

(Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Economists believe that the PBOC will continue easing monetary policy next year to aid the economy. There is widespread anticipation that China will maintain an accommodative monetary stance and potentially implement further stimulus measures, including interest rate cuts and reserve requirement ratio (RRR) reductions, in the coming year to support economic growth.

Market reactions to these liquidity injections and support measures have been positive, with China stocks rising and the Hang Seng China Enterprises Index up more than 3%. “China is injecting cash to boost the medium term liquidity to commercial banks.

The amount was higher than market expectations as an aid to the struggling Chinese economy. This should depreciate yuan, however dovish Fed policy is keeping all Asian currencies afloat," said an economist with a private bank.