SHANGHAI, Sept 25 (Askume) – China’s central bank lowered medium-term borrowing costs for banks on Wednesday, in line with broad policy easing measures announced a day earlier to boost the faltering economy.
The People’s Bank of China (PBOC) said it will cut the interest rate on a 300 billion yuan ($42.66 billion) one-year medium-term loan facility (MLF) loan to certain financial institutions to 2.00% from 2.30%.
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, the central bank said in a statement released online.
The Financial Times, a publication backed by the People’s Bank of China, said the first disclosure of the tender rate revealed differences in the medium- and long-term funding needs of various financial institutions and is in line with the central bank’s commitment to improving monetary policy transparency.
The MLF auction results were released separately ahead of open market operations, according to the state newspaper, which said it highlighted a deviation from the seven-day reverse repo rate that currently serves as the key policy rate.
“This move provides an opportunity for MLF to restore its position as a medium and long-term liquidity instrument,” the paper said.
RMB 591 billion of MLF loans matured this month.
Tuesday, BeijingThe biggest stimulus package since the pandemic was launched to help the economy emerge from deflation and return to the government’s growth goals.
“The rollover portion is not surprising, especially considering the planned reduction in the reserve requirement ratio (RRR),” said Francis Cheung, head of foreign exchange and rate strategy at OCBC Bank.
“Looking ahead, given the large MLF maturity volumes in the fourth quarter, there is an opportunity for another RRR cut before year-end.”
Zhang said the People’s Bank of China’s disclosure of the highest and lowest bids “reflects its intention to support lending based on demand and lower MLF rates as a policy guide.”
In addition, on the same day, the central bank increased capital by 196.5 billion yuan through 14-day reverse repurchase, and the interest rate remained unchanged at 1.85% from the previous operation.
(1 USD = 7.0318 RMB)
