In a move to stabilize financial conditions, the People’s Bank of China (PBOC) decided to keep the one-year Medium-term Lending Facility (MLF) rate unchanged at 2.50% during its recent announcement on Sunday. Simultaneously, the central bank injected 500 billion yuan into the financial system, slightly exceeding the 499 billion yuan maturing in MLF on the same day.
This decision marks a continuation of the PBOC’s efforts to maintain stability and support liquidity in the financial markets. The MLF rate was last adjusted in August 2023, when it was lowered from 2.65%, showcasing the central bank’s commitment to accommodating monetary policies.
Additionally, on Monday, the PBOC set the central rate for USD/CNY ahead of the trading session at 7.1032. This contrasts with Reuters’ estimates of 7.1970, indicating a deliberate effort by the central bank to provide a more favorable exchange rate for the Chinese yuan against the US dollar. The move is in line with the PBOC’s strategy to manage the yuan’s value and enhance its competitiveness in the global currency market.
The combination of maintaining the MLF rate, injecting liquidity, and setting a lower central rate for USD/CNY demonstrates the PBOC’s proactive approach to navigate economic challenges and ensure stability in the Chinese financial system. As global economic conditions continue to evolve, the central bank’s measures will play a crucial role in supporting domestic economic growth and maintaining the competitiveness of the Chinese yuan.
