Next RRR cut projected to be delayed until March

Barring the possibility of increased financial market risk.

Despite the absence of an RRR cut as CCB International had expected, the PBoC has injected massive liquidity with maturities varying from three days to one year.

According to a research note from CCB International, during the week ended 22 Jan, the PBoC made a short-term (3 to 28 days) net injection of RMB465b through open market operations.

In addition, the PBoC made a midterm injection (3 to 12 months) of RMB862.5b via Mid-term Lending Facility. This is more than an RRR cut of 50bp that releases liquidity of RMB680b.

Here's more from CCB International:

While we believe this will smooth the liquidity crunch usually seen before the Chinese New Year (CNY), it is not a substitute for RRR cuts. Among the RMB862.5b injections, 52% of them will expire in Apr and another 25% in Jul.

Unless there is a sharp rise in financial market risks, we expect the next RRR cut to be delayed until post-CNY, likely in Mar.

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