The monetary authorities of China are making a lot of effort to stabilize the national economy. In this regard, the People's Bank of China injected huge liquidity into the country's banking system via its Medium-Term Lending Facility (MLF). At the same time, the interest rate on one-year MLF loans remained unchanged.
According to the regulator, the massive cash injection amounted to 700 billion yuan ($101 billion). Nevertheless, China's central bank left the interest rate on one-year loans at 2.95% per annum, holding it steady for the fourth consecutive month.
Last time the People's Bank of China changed the rate was April this year. The regulator lowered its one-year interest rate on the MLF by 20 basis points to 2.95% from the previous level of 3.15%. The current figure is considered to be the lowest in the last six years since the liquidity program was introduced. Notably, China's medium-term lending funding is an important tool for borrowing money. The regulator uses it to supply liquidity to commercial banks, analysts emphasize.
The MLF aimed at the effective provision of liquidity to the banking system was established in China in 2014. Thanks to this program, Chinese banks can obtain loans from the PBOC using securities as collateral.
