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Dow Jones Newswires: In surprise move, China’s PBOC keeps key policy interest rates unchanged

BEIJING — China’s central bank kept its key policy interest rates unchanged on Friday, going against market expectations of a rate cut, to shore up the cooling economic growth amid the flare-up of COVID-19 outbreaks.

The People’s Bank of China said in a brief statement that it injected 150 billion yuan ($23.5 billion) of liquidity via its medium-term lending facility which will charge banks an interest rate of 2.85%. The rate was the same as the central bank’s last operation.

The PBOC also injected CNY10 billion through seven-day reverse repurchase agreements with a borrowing cost of 2.1%, also unchanged from its last operation.

Economists have anticipated the central bank to lower its key policy rates to give a boost to the world’s second largest economy, which has been battered by the outbreaks of the omicron COVID-19 variant. China’s benchmark lending rate–the loan prime rate–is priced based on the MLF interest rate.

The absence of a rate cut Friday, however, now increases the chances of a cut in the reserve requirement ratio for banks, which could unleash billions of dollars of liquidity into the financial system.

China’s Premier Li Keqiang said in a meeting Wednesday that China will use reserve requirement ratios cuts and other monetary tools to provide support for the nation’s struggling businesses, which have been affected by the government’s draconian virus-prevention measures.

The two previous RRR cuts in July and December last year came days after a similar signal from Li.

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