(Yicai Global) Oct. 17 -- After trimming the size of its medium-term lending facility for two straight months, MLF operations by China’s central bank matched the amount of maturing loans and kept rates unchanged this month. That should help the banking sector strengthen loan issuance this quarter to support the economic recovery, analysts said. 

The People’s Bank of China announced one-year MLF operations worth CNY500 billion (USD69.5 billion) today, the same as the expiring loans, with the same interest rate of 2.75 percent. In September and August, the PBOC had reduced the MLF balance by CNY400 billion by scaling back operations. 

Ceasing reductions this month will keep liquidity relatively abundant in the banking sector, which will support loan issuance in the fourth quarter and provide the right financial environment for economic growth to recover to the normal level, said Wang Qing, chief macro analyst at Golden Credit Rating. 

Borrowing by individuals and companies rebounded after the central bank revised the policy rate downward in August. Per PBOC statistics, China’s new yuan-denominated loans totaled CNY2.47 trillion (USD343.1 billion) last month, up CNY1.22 trillion from August. 

Given the increasing demand for loans, issuance will be strengthened in future, Wang said, adding that the central bank might even expand the value of MLF operations or cut the reserve requirement ratio before this year’s end. 

The PBOC has cut the loan prime rate three times this year: in January, May and August. At the end of last month, the central bank also announced a cut in the interest rate on housing provident fund loans for first-time homebuyers, the first cut since August 2015. 

With the backdrop of the current downturn of China’s housing market, the PBOC will probably lower the five-year LPR again this month, or further relax the lower limit on mortgage rates for first-time and even second-time homebuyers in future, Wang added.

Editors: Dou Shicong, Tom Litting