BEIJING (Reuters) - New bank loans in China rose to a three-month high in June as policymakers sought to keep ample funds in the financial system to support the slowing economy amid rising U.S. trade pressure.

Most analysts have forecast the Chinese economy would stabilize in the second half of this year after a flurry of support measures, but weak data for June so far is raising expectations that more stimulus is needed.

Chinese banks extended 1.66 trillion yuan ($241.47 billion)in net new yuan loans in June, up from 1.18 trillion yuan in May but less than expected, according to data released by the People’s Bank of China (PBOC) on Friday.

The figure was also lower than the tally in June 2018.

Analysts polled by Reuters had predicted new loans would rise to a 5-month high of 1.7 trillion yuan. Lending typically picks up in June from May.

“The pick-up in lending has been modest relative to previous loosening cycles and is unlikely to prevent economic growth from slowing further in the coming quarters,” Capital Economics said in a note.

Household loans, mostly mortgages, rose to 761.7 billion yuan from 662.5 billion yuan in May, while corporate loans rose to 910.5 billion yuan from 522.4 billion yuan.

Broad M2 money supply rose 8.5% in June from a year earlier, the same pace as May. Analysts had expected an 8.6% rise.

Outstanding yuan loans rose 13.0% on-year, well below an expected 13.4% and down from 13.4% in May. Some analysts say the annual comparison is a better way to assess trends in China’s credit growth, rather than more volatile monthly tallies.

The month was marked by a trade ceasefire agreed by the leaders of China and the United States at a G20 meeting in late June, which appeared to take some pressure off the Chinese central bank, which has been loosening credit conditions since last year.

But higher U.S. tariffs on Chinese goods, imposed the month before, remained in place, pointing to further pain for the country’s export-oriented manufacturers.

Central bankers also had to calm market worries of financial contagion in June after regulators seized a troubled, debt-laden regional bank. Some short-term lending rates briefly shot to record highs as smaller firms scrambled for funding, before repeated cash injections by the PBOC steadied nerves.

(graphic: tmsnrt.rs/2iO9Q6a)

UNCERTAIN OUTLOOK

A stream of downbeat economic data in recent months has suggested the world’s second-largest economy is still struggling to get back on firmer footing, underlining a need for more policy easing.

Sluggish loan demand would bolster views that companies remain wary of making fresh investments due to the uncertain business climate, despite the central bank’s frequent liquidity injections.

But there was faster growth in other forms of credit.

The total value of special bonds issued by local governments in June is likely to be the highest so far this year, the Economic Information Daily reported, citing market data.

Corporate bond issuance also appears to have picked up last month in response to falling market interest rates. The central bank poured funds into money markets ahead of a seasonal surge in cash demand at the end of June.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 10.9% in June from a year earlier from 10.6% in May.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In June, TSF rose 61% to 2.26 trillion yuan from 1.4 trillion yuan in May. Analysts polled by Reuters had expected 1.95 trillion yuan.

MORE SUPPORT MEASURES EXPECTED

With the economy slow to respond to earlier growth measures, some analysts believe the People’s Bank of China (PBOC) could cut its benchmark policy rate for the first time in four years if the U.S. Federal Reserve delivers a widely expected cut in late July.

Market watchers, however, believe the PBOC is more likely to follow any U.S. rate cut by trimming its key short-term money market rates. More aggressive rate cuts, they argue, would risk adding to a mountain of debt left over from past stimulus binges.

China is expected to report on Monday that economic growth cooled to 6.2 percent in the second quarter from a year earlier, the slowest pace in at least 27 years. Some economists’ in-house models suggest actual growth is much lower than official data show.

Premier Li Keqiang raised expectations of more policy easing by pledging to further cut banks’ reserve requirement ratios and lower real interest rates to help reduce funding costs for small firms.