SHANGHAI (Reuters) – China’s central bank is expected to inject more liquidity when rolling over maturing medium-term policy loans for a fifth straight month on Monday, while keeping the interest rate unchanged, a Reuters survey of traders and analysts showed.

The People’s Bank of China (PBOC) will continue to keep liquidity ample to support the economy and offset the impact from next week’s tax collection, traders and analysts said.

Levies in the April tax season could drain as much as 1.7 trillion yuan ($248.5 billion) from the banking system, CITIC Securities estimates.

“The central bank needs to step in with more fresh capital when the market is dealing with such volume,” a bond fund manager in Shanghai, who declined to be named, said.

Although China ended its stringent zero-COVID policy in December, its recovery has been slow and March’s disinflationary data suggests consumption demand remains sluggish, raising expectations of more fiscal and monetary stimulus.

In a poll of 29 market watchers this week, all predicted the PBOC would keep the interest rate on its one-year medium-term lending facility (MLF) unchanged at 2.75%.

Among them, 23 of the respondents expected the central bank to inject an extra 100-300 billion yuan through MLF operations, while the remaining six forecast just a full rollover of the 150 billion yuan ($21.93 billion) worth of maturing debt.

“The scale of maturing loans is not that much, making an outsized rollover likely, with the incremental estimated around 200-300 billion yuan,” a Beijing-based trader said.

Analysts and traders also expect the central bank to inject fresh funds through open market operations next week, in addition to the outsized MLF rollover.

The MLF rate serves as a guide to the loan prime rate (LPR)and markets mostly use the medium-term policy rate as a precursor to any changes to lending benchmarks.

The monthly LPR fixing is due on April 20.

($1 = 6.8404 Chinese yuan renminbi)

(Reporting by Li Gu and Tom Westbrook; Editing by Alexander Smith)

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