PBoC injects CNY 150 bn to support growth – ING

FXStreet (Barcelona) - The ING Bank Research Team comments on the PBoC’s action to inject CNY 150bn ($24 bn), noting that this growth supportive act makes it as a substitute for a interest rate cut, and further add that RRR cuts and policy interest rate cuts should be used only when downward pressure on growth becomes too great.

Key Quotes

“The PBoC injected CNY 150 billion (about $24 billion) of liquidity yesterday through a variety of instruments. It expanded its Medium-term Lending Facility (MLF) by CNY 50 billion, injected CNY 50 billion via reverse repos, the first such injection in a year, and auctioned CNY 50 billion of six-month Treasury deposits.”

“We think the auction of Treasury deposits aims to boost lending, which makes it a substitute for a policy interest rate cut. We consider MLF injections a substitute for RRR cuts. RRR cuts and policy interest rate cuts are bazookas to be used when downward pressure on growth becomes too great.”