PBoC surprised markets by leaving rates unchanged, but MLF was a giveaway

China leaves 1-year loan prime rate unchanged at 3.70% (estimated 3.65%); leaves 5-year loan prime rate unchanged at 4.60% (estimated 4.55%).

AUD/USD is a couple of pips lower on the decision despite surprising markets. AUD/USD is staying put below 0.7402 highs and trades at 0.7394.

The decision was polled by Reuters as and expected a reduction.

''The loan prime rate (LPR), which banks normally charges their best clients, is set on the 20th of each month, when 18 designated commercial banks submit their proposed rates to the People's Bank of China.''

''A vast majority of the 28 traders and analysts surveyed in a snap Reuters poll on Tuesday expect a reduction this month.''

''Among them, 11, or 39% of all respondents, predicted a marginal cut of 5 basis points (bps) to both the one-year loan prime rate (LPR) and the five-year rate on Wednesday. Another six participants also expect a reduction to either rates within a range of 5 to 10 bps.''

However, last week, the PbOC rolled over the MLF, or the medium term lending facility at an unchanged rate as well, which could have been a precursor for today's decision.

About the PBoC Interest Rate Decision

The PBoC Interest Rate Decision is announced by the People´s Bank of China. If the PBoC is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the CNY. Likewise, if the PBoC has a dovish view on the Chinese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.

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