PBoC likely to raise interest rates on its MLF loans by 10 bps again, says Scotiabank

The People’s Bank of China (PBoC) is expected to raise the interest rates on its MLF loans by 10 basis points again as the Federal Reserve remains on track to deliver a 25 basis points rate hike next Thursday.

PBoC Deputy Governor Chen Yulu said at a forum on Saturday that the central bank will purse "neither loose nor tight" monetary policy to ensure liquidity remains basically stable, creating a "neutral and appropriate" financial environment for supply-side reform.

Further, the central bank on Monday resumed 28-day reverse repo sales to inject liquidity into the banking system ahead of the half-year end when the so-called Macro-Prudential Assessment (MPA) for Q2 is due.

"Meanwhile, we stay watching the headlines on US political controversy and ECB monetary policy meeting that could dampen market sentiment and undermine most EM Asian currencies," Scotiabank commented in its latest research report.