China’s central bank prepares to increase cash injections before the Lunar New Year holiday

© Reuters. File photo: Renminbi banknotes can be seen in this illustration taken on February 10, 2020. REUTERS/Dado Ruvic

SHANGHAI (Reuters)-The state-owned China Securities Journal said on Wednesday that the People’s Bank of China will “fill in time” the liquidity gap before the Lunar New Year holiday.

The People’s Bank of China (PBOC) may start to inject capital into the banking system through open market operations from the second half of this month to meet the growing cash needs of businesses and households before the start of the week-long holiday. According to the official newspaper, from January 31 this year.

“Many financial institutions believe that the central bank will maintain reasonable and sufficient liquidity… and may use a variety of policy tools such as reverse repurchase and medium-term lending facilities to meet their reasonable funding needs and smoothly spend the Spring Festival holiday. “The paper said.

Although the market has reached a consensus on providing higher liquidity before the long holiday, many market participants and analysts are still divided on whether the central bank will lower the interest rate on medium-term lending facility (MLF) loans.

China lowered its benchmark lending prime rate (LPR) in December for the first time in 20 months to support a slowing economy, but it remains cautious about the easing of the country’s highly leveraged real estate market.

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