China’s central bank cut medium-term lending costs for banks on Wednesday, a move in line with broad policy easing announced a day earlier to shore up the economy.
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China’s central bank cut medium-term lending costs for banks on Wednesday, a move in line with broad policy easing announced a day earlier to shore up the economy.
The People’s Bank of China said it would lower the interest rate on some financial institutions’ 300 billion yuan ($42.66 billion) one-year mid-term lending facility from 2.30% to 2.00%.
A statement released by the central bank online said that the winning bid rate for Wednesday’s operation was 1.90% to 2.30%, and the current MLF loan balance is 6.878 billion yuan.
A batch of 591 billion yuan in MLF loans matured this month.
On Tuesday, Beijing launched its biggest stimulus package since the pandemic in a bid to pull the economy out of a deflation scare and back toward the government’s growth targets.
“The partial rollover is not surprising, especially given the planned reduction in the reserve requirement ratio (RRR),” said Frances Cheung, head of FX and rates strategy at OCBC Bank. The amount of cash banks are required to hold as reserves.
“Looking ahead, given the large number of MLF maturities in the fourth quarter, there is a window of opportunity for another RRR cut before the end of the year.”
Zhang said the People’s Bank of China’s disclosure of the maximum and minimum bids reflected “an aim to make the arrangement more demand-driven and downplay the role of the MLF rate as a policy guide.”
On the same day, the central bank invested another 196.5 billion yuan through 14-day reverse repurchase, and the interest rate remained unchanged at 1.85%.
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