China central bank surprises markets, leaves medium-term rate unchanged

SHANGHAI  —China’s central bank boosted liquidity injections but surprised markets by leaving the interest rate unchanged when rolling over maturing medium-term policy loans on Monday.

The People’s Bank of China (PBOC) said it was keeping the rate on 995 billion yuan ($138.84 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.5 percent from the previous operation.

READ: China has more space to cut reserve ratio instead of interest rates

In a Reuters poll of 35 market participants conducted last week, 19 or 54.3 percent had expected the central bank to cut the MLF rate to help shore up the weak economy. And a vast majority of the respondents also expected the PBOC to inject fresh funds into the financial system exceeding the amount that were maturing.

With 779 billion yuan worth of MLF loans set to expire this month, the operation resulted a net 216 billion yuan fresh fund injection into the banking system.

The central bank also injected 89 billion yuan through seven-day reverse repos while keeping borrowing cost unchanged at 1.8 percent, it said in an online statement.