(Bloomberg) -- China’s central bank is expected to pump more cash into the financial system with policy loans this week, countering tightened liquidity that partly stems from large bond sales. 

The People’s Bank of China may inject a net of 325 billion yuan ($45.3 billion) through its medium-term lending facility on Friday, according to the median estimate of 10 analysts surveyed. That would be less than the 600 billion yuan added last month.  

The cash support is needed as Beijing rushes to sell 1 trillion yuan of sovereign debt in the last two months of the year to support the faltering economy. While the PBOC is providing more liquidity, it’s expected to keep the one-year policy rate unchanged at 2.5% as the government signaled that it will lean on fiscal measures to counter headwinds facing the world’s second-largest economy.

“Given liquidity and credit demand, there should be injection to meet the need for loans in the fourth quarter,” said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group.

More liquidity is needed as Chinese financial firms tend to hoard cash to gear up for year-end regulatory checks. The PBOC may also have started preparing for the peak funding season ahead of the Chinese New Year in mid-February.

While the consensus of 17 analysts surveyed is for the one-year policy rate to remain unchanged, several of them — including the ones from Citic Securities, Capital Economics, Oxford Economics and Credit Agricole CIB — anticipated a rate cut of 10 basis points. They cited the recently receding pressure on the yuan as a major reason for a possible cut. 

The PBOC hadn’t wanted to cut rates as it would widen differentials with the US. That would heap more pressure on the yuan, which has fallen about 3.9% this year.

“The PBOC restated its intention to reduce financing costs for the real economy in its latest quarterly report,” said Zichun Huang, a China economist at Capital Economics. “The main barrier to PBOC rate reductions since the middle of this year has been the strength of the dollar. But the currency has now returned to levels that the PBOC is more comfortable with, which should open the door to a resumption of rate cuts.”

Other economists say authorities may want to ensure that the yuan’s recent strength is safeguarded, and so will want to avoid cutting rates for now. Even though consumer prices are dropping and pushing real borrowing costs higher, the central bank still faces several limitations to its ability to cut rates — including narrowing profit margins among banks. 

Some of those surveyed also expected the PBOC to cut banks’ reserve requirement ratio in the coming months to free up long-term liquidity in the banking system. But their estimates on whether that cut would arrive before the end of the year were mixed. 

“A RRR cut is technically needed,” said He Wei, China economist at Gavekal Dragonomics. “It’s just a matter of time. It’s necessary at the stage of economic recovery. Policymakers may want to take action together with other policies.” 

--With assistance from Shulun Huang and Yujing Liu.

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