Today’s News
China’s central bank lowered the interest rate on its medium-term loans to banks on Wednesday, aligning with broader policy easing measures announced the day before to support the struggling economy.
Image Source: Central Banking
The People’s Bank of China (PBOC) reduced the rate on 300 billion yuan (USD 42.66 billion) of one-year medium-term lending facility (MLF) loans to 2.00% from 2.30%.
In Wednesday’s operation, bid rates ranged from 1.90% to 2.30%, and the total outstanding balance of MLF loans now stands at 6.878 trillion yuan (USD 979.9 billion), according to an online statement from the central bank. This move followed the expiration of 591 billion yuan (USD 84.2 billion) worth of MLF loans earlier this month.
On Tuesday, Beijing introduced its largest stimulus since the pandemic in an effort to steer the economy away from deflation and towards its growth targets.
Image Source: Bloomberg
Frances Cheung, head of FX and rates strategy at OCBC Bank, commented on the decision, noting, “The partial rollover did not come as a surprise, especially with the planned reserve requirement ratio (RRR) cut.”
Cheung further added that another RRR cut could be on the horizon before the year ends, particularly due to the significant MLF loan maturities expected in the fourth quarter.
She also highlighted the PBOC’s transparency in disclosing bid ranges, indicating the central bank’s intention to make the facility more demand-driven and reduce reliance on the MLF rate for policy guidance.
In addition to the MLF rate cut, the PBOC injected another 196.5 billion yuan (USD 27.9 billion) into the banking system through 14-day reverse repos, keeping the interest rate unchanged at 1.85%.
(USD 1 = 7.0318 Chinese yuan)
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