SHANGHAI/SINGAPORE (Reuters) - China's central bank is widely expected to cut the borrowing cost of medium-term policy loans for the first time in 10 months on Thursday, after it lowered two key short-term policy rates, a Reuters poll showed.

The People's Bank of China (PBOC) cut its seven-day reverse repo rate and standing lending facility (SLF) rate by 10 basis points on Tuesday, signalling possible easing for longer-term rates to revive demand and restore investor confidence in the world's second-largest economy, analysts and traders said.

China remains an outlier among global central banks as it loosens monetary policy to shore up a stalling recovery but further rate cuts will widen the yield gap with U.S. assets and risk greater outflows.

In a poll of 33 market watchers conducted this week, all participants predicted that the central bank would lower the interest rate on one-year medium-term lending facility (MLF) loans when it is due to roll over 200 billion yuan ($27.92 billion) worth of such maturing loans on Thursday.

Among them, 31 or 94% of all respondents expected a 10-basis-point cut, while one predicted a 5-basis-point reduction and the other one forecasted a deeper cut of 15 basis points.

"As the open market operations (OMO) reverse repo rate moves in lockstep with the one-year MLF rate, which has become one of the most important benchmark rates in the PBOC's policy rate system, an OMO rate cut will almost surely be followed by an MLF rate cut, and the sequence of the two cuts matters less than the cuts themselves," said Ting Lu, chief China economist at Nomura.

The MLF rate serves as a guide to the benchmark loan prime rate (LPR), and markets usually use the medium-term rate as a precursor to any changes to the lending benchmark. The monthly fixing of the LPR will be announced on June 20.

"We expect a 10bp cut in the MLF rate on June 15, followed by an asymmetric cut in the LPR rates on June 20: a 10bp for 1-year LPR and 15bp for 5-year LPR," said Larry Hu, chief China economist at Macquarie.

"The cut is larger for the 5-year LPR, as it's linked to the mortgage rate. Looking ahead, we expect another 10bp cut in the MLF rate in 3Q23."

The PBOC last cut the MLF rate in August 2022 to prop up the broad economy disrupted by stringent zero-COVID measures.

($1 = 7.1626 Chinese yuan)