The central bank announced a reduction in the
MLF (Medium-term Lending Facility) rate to boost liquidity in the market.
中央银行宣布降低中期借贷便利(
MLF)利率以增加市场流动性。
Through the
MLF operation, banks can obtain funds from the central bank for a period of one year, supporting their medium- and long-term lending activities.
通过中期借贷便利操作，银行可以从中央银行获得为期一年的资金，支持其中期和长期贷款活动。
The
MLF is an important monetary policy tool used by the central bank to manage money supply and guide interest rates.
MLF是中央银行用来管理货币供应量和引导利率的重要货币政策工具。
By adjusting the
MLF quota, the central bank can effectively control the overall credit growth in the economy.
通过调整
MLF额度，中央银行可以有效控制经济中的整体信贷增长。
The
MLF facility helps stabilize interbank borrowing costs, ensuring that commercial banks have access to funding at reasonable rates.
MLF机制有助于稳定银行间借贷成本，确保商业银行能以合理利率获得资金。
In response to economic slowdown, the government increased the
MLF injection to stimulate lending and boost economic activity.
针对经济放缓，政府增加了
MLF的注入量以刺激贷款并增强经济活力。
The
MLF plays a crucial role in transmitting monetary policy signals to the real economy, influencing lending behaviors of financial institutions.
MLF在将货币政策信号传导至实体经济中发挥着关键作用，影响金融机构的贷款行为。
Unlike the short-term open market operations,
MLF offers a more stable source of funding for banks, supporting their asset and liability management.
与短期公开市场操作不同，
MLF为银行提供了更稳定的资金来源，支持其资产负债管理。
The recent
MLF rate cut signals the central bank's intention to lower borrowing costs and encourage investment.
最近的
MLF利率下调标志着中央银行降低借贷成本和鼓励投资的意图。
Banks participating in the
MLF program must pledge high-quality assets as collateral, ensuring the safety of central bank funds.
参与
MLF计划的银行必须以高质量资产作为抵押，确保中央银行资金的安全。
But the government launched a string of effective macro policies including MLF interest cuts and large-scale reverse repos.
"After the cut in the short-term policy lending rate, the PBOC is highly likely to deliver a cut to the one-year MLF rate, which is … the most important benchmark rate in the PBOC's policy rate regime", said Lu Ting, chief China economist at Nomura, adding they believe the central bank will deliver a 10 basis point one-year MLF rate cut on Thursday, and a similar sized cut to the LPR on June 20.
In the system, the open market operation interest rate is the central bank's short-term policy rate, and the interest rate of the medium-term lending facility, or MLF, is the medium-term policy rate.
The one-year MLF interest rate currently stands at 2.95 percent.
The relending facility is offered at a rate of 2.25 percent for one-year funds, compared with 2.95 percent for the one-year medium-term lending facility, or MLF, the central bank's mid-term policy rate.
A total of 150 billion yuan (about 23.11 billion U. S. dollars) was last month injected into the market via the medium-term lending facility (MLF) to maintain liquidity in the banking system at a reasonable and sufficient level, according to the People's Bank of China (PBOC).
Total outstanding MLF loans reached 5.4 trillion yuan by the end of April.
The MLF tool was introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank using securities as collateral.
China's central bank injected liquidity into the banking system through reverse repos and medium-term lending facility (MLF) on Monday to keep liquidity reasonable and ample.
A total of 995 billion yuan was also injected into the market via the MLF, which will mature in one year at an interest rate of 2.5 percent, unchanged compared with previous operation.
With 779 billion yuan worth of MLF loans set to expire this month, Monday's operation resulted in a net injection of 216 billion yuan in fresh funds into the banking system.
The steady MLF rate defied market expectations for a lower MLF rate and a reduction in commercial banks' reserve requirement ratio (RRR), and is likely to delay the RRR reduction, Wen said.
Ming Ming, chief economist at CITIC Securities, said the MLF operation of the central bank also indicated the efforts to stabilize the exchange rate of the yuan.
It lowered the one-year MLF rate to 2.5 percent from 2.65 percent, and the seven-day reverse repo rate to 1.8 percent from 1.9 percent.
The one-year loan prime rate, a market-based benchmark lending rate and a reflection of MLF readings, was also cut to 3.45 percent on Aug 21, from 3.55 percent earlier, according to the National Interbank Funding Center.
Heavy MLF maturity in the second half, coupled with accelerated government debt issuances, also make it more likely that MLF rate cuts would be replaced by a cut in the RRR, so as to maintain reasonable and ample market liquidity, and reduce liability costs.
MLF, reverse repos adjusted; experts expect LPR to fall, credit to pick upThe Chinese central bank's cuts to benchmark interest rates on Tuesday are timely and will stabilize growth and market expectations — and more stimulative measures can be expected to further facilitate economic recovery, experts said.
The MLF is an instrument with which commercial and policy banks can borrow from the central bank using securities as collateral.
The adjustment in the MLF interest rate can thus help adjust market liquidity.
Following the latest cut to the MLF rate, the loan prime rates, the market-based lending rate benchmarks, are expected to be lowered this month.
The central bank injected 401 billion yuan ($55.87 billion) into the market through one-year MLF with an interest rate of 2.5 percent, down from 2.65 percent.
The MLF tool helps commercial and policy banks maintain liquidity by allowing them to borrow from the central bank using securities as collateral.
The cuts came ahead of the PBOC's release of the medium-term lending facility (MLF) rate and loan prime rate (LPR) decisions, which are set for Thursday and next week, respectively.
In August 2022, when the PBOC last cut the reverse repo rate by 10 basis points, the MLF rate was brought down the same day, while the LPR, a market-based benchmark lending rate, was lowered a week later.
"This means the PBOC will almost surely deliver a 10 basis point, one-year MLF rate cut on June 15 and a similarly sized cut to the LPR on June 20," said Lu Ting, chief China economist at Nomura.
"Lu's views were echoed by Yao Wei, chief economist and head of research for Asia-Pacific at Societe Generale, who expects to see reductions in MLF and LPR interest rates in the following days.
On Monday, the People's Bank of China, China's central bank, rolled over maturing medium-term lending facility or MLF while keeping the interest rate unchanged at 2.75 percent.
Otherwise, MLF loans are expected to be the main tool to provide liquidity.
The MLF is an instrument where the central bank provides loans to financial institutions to adjust market liquidity and determine the policy interest rate benchmark.
On Wednesday, MLF loans worth 300 billion yuan ($43.9 billion) in all are expected to mature.
Lou Feipeng, a researcher at Postal Savings Bank of China, said it is reasonable for the MLF operation to inject additional liquidity on top of rolling over the maturing amount to meet market demand for liquidity and back the country's economic recovery.
Zhou Maohua, a macroeconomic analyst at China Everbright Bank, however, said he expects the MLF interest rate to stay unchanged on Wednesday as the PBOC may need to further gauge the strength in credit demand after January's strong recovery.
China last cut the MLF interest rate in August by 10 basis points to 2.75 percent.
Liu's remarks may have implied that MLF rate cuts in 2023 may be no lower than 20 basis points, a Guosheng Securities report said on Monday, adding that financial market liquidity is unlikely to see a tightening trend as the PBOC remains committed to keeping liquidity reasonably ample.
While the MLF rate may stay unchanged, the over-five-year loan prime rate — a market-driven benchmark for mortgage rates — might decrease further to reduce homebuying costs and stabilize the real estate sector, Wang said.
A total of 650 billion yuan in new medium-term liquidity was injected, outnumbering the 500 billion yuan in MLF that matured on Thursday.
Zhu Haibin, JPMorgan's chief China economist, said in a recent report that he expects the PBOC may slightly cut the MLF rate in the second quarter of 2023, citing the continuation of low inflation and the need to boost economic growth as the main reasons.
Lowering the MLF rate is the most direct and effective means for lowering costs.
However, in the context of the gradual formation of a price-based monetary policy regulatory framework, the adjustment of the MLF rate may have a bigger-than-expected impact.
In other words, internal and external constraints should be thoroughly considered before making any MLF cuts.
If the economic recovery is not on a par with expectations by that time, the PBOC may moderately lower the MLF policy rate to further increase support for the real economy.
In addition, the maturity of the MLF in December this year and January 2023 will reach 500 billion yuan and 700 billion yuan, respectively.
While the interest rate of the medium-term lending facility or MLF, which serves as a guide to LPRs, stayed unchanged on Monday, some experts said LPRs might still decrease in the coming months as the latest MLF operation pointed to the central bank's willingness to strengthen support for the real economy.
On Monday, the People's Bank of China, the country's central bank, halted cash withdrawal via its MLF operations for the first time in three months, delivering liquidity support stronger than expected.
The PBOC injected 500 billion yuan ($69.45 billion) worth of one-year MLF loans to the banking system on Monday, matching the amount maturing this month and resulting in no injection or withdrawal of liquidity on a net basis.
The central bank kept the interest rate on MLF operation at 2.75 percent, unchanged from the previous month.
Zhang Xu, a fixed-income analyst at Everbright Securities, said the PBOC has made a full MLF rollover even as market interest rates are relatively low, delivering a clear signal that the central bank is willing to beef up support for the real economy.
- China's central bank on Thursday added liquidity to the banking system through operations of medium-term lending facility (MLF) and reverse repos.
The People's Bank of China injected 400 billion yuan (about $57.89 billion) into the market through one-year MLF with an interest rate of 2.75 percent.
The first was in May, when neither the MLF nor the one-year LPR was changed while the five-year LPR was adjusted with a single maximum-sized move of 15 bps.
The latest round of MLF reductions, together with the five-year LPR cut, has created more space for reductions in mortgage interest rates.
Second, as for MLF, after the rate cuts, interest rates of bank bonds may also see declines.
In the past year, there has been 4.95 trillion yuan in MLF, 21.4 trillion yuan in NCD and 7.1 trillion yuan in bank bonds.
With lower-than-expected reductions in the one-year LPR, and it also being the first time in history that the decline is lower than MLF, we think it may be because corporate loan interest rates have been greatly reduced amid the backdrop of weak credit demand this year.
On Aug 15, the central bank lowered the one-year MLF by 2.75 percent, down from 2.85 percent the previous month.
Analysts from Vanguard Investment Strategy Group said they believe the central bank will maintain the MLF at 2.75 percent till the end of this year.
The monthly-released data is a pricing reference rate for banks and is based on rates of the central bank's open market operations, especially the medium-term lending facility rate (MLF).
China's central bank cut the interest rates of its MLF loans by 10 basis points last week, the second such move this year.
In addition, the cost of interbank liabilities fell sharply just as the money market interest rate did, and the spread between the issuance interest rate of one-year interbank certificates of deposit and MLF loans expanded, which averaged 27 bps in the first quarter and expanded to 60 bps in July and 81 bps since the beginning of August.
The main reasons for the contraction of MLF loans are that banks have insufficient demand for high-cost MLF funds and the divergence between policy rates and market rates is huge, reducing the leading effect of MLF policy rates on the cost of bank liabilities, so there is a great need for convergence between policy rates and market rates.
- China's central bank has leveraged its policy toolkit, cutting the interest rates of its medium-term lending facility (MLF) loans and reverse repos by 10 basis points for the second time this year, to further consolidate economic growth.
Specifically, the People's Bank of China lowered the rate of 400 billion yuan (about $59 billion) worth of one-year MLF to financial institutions to 2.75 percent from the 2.85-percent rate it opted for on the previous occasion.
Using the MLF rate as a key policy benchmark, the PBOC had kept it unchanged for six months until Monday's reduction.
The MLF rate cut may only be the first step to ramp up monetary support, analysts with Soochow Securities said in a report.
"Unveiled around the 20th of each month, the one-year and over-five-year LPRs are formed based on quoting banks' lending rates to their highest quality customers, which in turn take the MLF rate as benchmarks.
The MLF interest rate is used as a policy benchmark for one-year interest rates.
- China's central bank on Friday added liquidity to the banking system through operations of medium-term lending facility (MLF) and reverse repos.
The People's Bank of China injected 100 billion yuan ($14.81 billion) into the market through one-year MLF with an interest rate of 2.85 percent.
The People's Bank of China injected 150 billion yuan ($23.48 billion) into the monetary market through one-year MLF with an interest rate of 2.85 percent.
Analysts review economic headwinds after 1-yr MLF bags 200b yuan at 2.85%Although the People's Bank of China has kept key rates unchanged so far this month, current economic headwinds might still persuade the country's central bank to cut key policy interest rates in the second quarter of the year, experts said on Tuesday.
Tuesday's OMO also signaled the PBOC's intention to boost credit expansion, as it has injected a net 100 billion yuan in mid-to-long-term liquidity into financial institutions after subtracting the 100 billion yuan of MLF due on Tuesday.
The PBOC last cut the one-year MLF interest rate by 10 basis points to 2.85 percent in January, after which economic activity showed more signs of stabilization.
"The possibility of reducing the MLF interest rate by another 10 basis points is rising," Wang said, adding it is necessary for monetary policy to ramp up support to offset headwinds facing consumption growth and the property sector as well as effects from rising domestic COVID-19 cases.
Lu Ting, Nomura's chief China economist, said he believes there is a "reasonably high likelihood" for the PBOC to cut the one-year MLF rate by around 10 basis points in April.
On Jan 17, the PBOC scaled up liquidity injection and cut interest rates for its medium-term lending facility (MLF) and reverse repos by 10 basis points.
Chen Xingdong, chief China economist with BNP Paribas, said the PBOC will likely further cut the MLF interest rate in April or May by 5 basis points to boost credit growth and stabilize domestic demand.
For the first time since April 2020, the Chinese central bank lowered the one-year MLF interest rate in Jan by 10 basis points to 2.85 percent in order to reduce corporate financing costs.
Last week, the PBOC cut the interest rates of its medium-term lending facility (MLF) loans and seven-day reverse repos by 10 basis points.
Analysts said the rate adjustment for 14-day reverse repos "follows the steps" of MLF and seven-day reverse repos as the reduction volumes are the same.
The LPR quotation is now determined by the MLF with certain differences.
Therefore, the lowered MLF will lead to a drop in LPR quotations, which in turn will lower the comprehensive financing cost in the real economy.
Based on past experiences, the reserve requirement ratio will be lowered in succession to the MLF and LPR cuts to further release liquidity into the market, Huang said.
The monthly-released data is based on rates of the central bank's open market operations, especially the medium-term lending facility (MLF) rate.
The move came in line with market expectations as the central bank on Monday cut the interest rates of the MLF loans and reverse repos by 10 basis points to lower lending costs for businesses.
Going forward, China's policymakers will continue to rely on RRR, open market operations, MLF and other monetary policy tools to maintain a reasonable abundance of market liquidity, Wen said, adding structural monetary policy will also be adopted to increase precise support for areas including small and micro enterprises, scientific and technological innovation, and green development.
Fresh moves came on Monday as the People's Bank of China (PBOC) cut the interest rates of its medium-term lending facility (MLF) loans and reverse repos by 10 basis points, amid the country's efforts to lower lending costs for businesses and further shore up economic growth.
Specifically, the central bank lowered the rate of 700 billion yuan ($110 billion) worth of one-year MLF to financial institutions to 2.85 percent, compared with 2.95 percent on the previous operation.
With 500 billion yuan worth of MLF and 10 billion yuan worth of reverse repos maturing on the same day, the aforementioned moves led to a net liquidity injection of 290 billion yuan into the market.
Lian Ping, chief economist at Zhixin Investment Research Institute, said lowering the MLF interest rates, as a policy tool, will help increase mid- and long-term loans, and thereby optimize the country's loan structure.
To ensure adequate liquidity in the Chinese banking system, the People's Bank of China, the central bank, announced on Monday it has lowered the cost of borrowing for its medium-term lending facility, a key policy rate known as MLF, for the first time since April 2020.
The interest rate on 700 billion yuan ($110 billion) worth of one-year MLF loans has been lowered by 10 basis points to 2.85 percent, the PBOC said.
Lu Ting, chief China economist at Nomura Securities, said another 10 basis point cut of the MLF rate can be expected before June-end.
Jiang Qijia, senior analyst at Noah Holdings Ltd, a financial market services provider, said Monday's MLF rate cut is largely in line with the market expectations of a policy rate cut in the first quarter of the year, but only carried out at a faster pace.
Following the MLF rate cut on Monday, the one-year loan prime rate, the benchmark lending rate, may be lowered by 5 to 10 basis points this month, said analysts from the Bank of Communications Research Center.
China's central bank Monday cut the interest rates of its medium-term lending facility (MLF) loans and reverse repos by 10 basis points amid the country's efforts to lower lending cost and further shore up economic growth.
The People's Bank of China (PBOC) lowered the rate of 700 billion yuan ($110 billion) worth of one-year MLF to financial institutions to 2.85 percent, compared with 2.95 percent on the previous operation.
With 500 billion yuan worth of MLF and 10 billion yuan worth of reverse repos maturing on the same day, the aforementioned moves will lead to a net liquidity injection of 290 billion yuan into the market.
A total of 500 billion yuan (about $78.47 billion) was injected into the market via medium-term lending facility (MLF), according to the People's Bank of China, the central bank.
A total of 1 trillion yuan ($156.5 billion) was injected into the market via medium-term lending facility (MLF), according to the People's Bank of China, the central bank.
The operation included a rollover of MLF funds that are expected to mature Tuesday and on Nov 30, the central bank said.
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