PBOC Maintains MLF Rate Steady as Economic Indicators Rebound and Monetary Strategy Shifts
1min read The People's Bank of China (PBOC) recently conducted a 900 billion yuan operation using the Medium-term Lending Facility (MLF) with a duration of one year. This operation was executed with a bidding rate ranging from 1.90% to 2.30%, with the winning rate being 2.00%. Post-operation, the balance of MLF stands at 6.239 trillion yuan.
According to industry insiders, the MLF operation rate for November has remained consistent with the previous month. This stability follows a reduction in MLF rates by 0.3 percentage points in September. Since then, rates have held steady in October and November, attributed to the stabilization of key market reference rates such as policy rates and the Loan Prime Rate (LPR).
It's reported that economic conditions have shown improvement, with key indicators rebounding, and the real estate market gaining traction. Current policies aim to transmit the impacts of rate reductions to the corporate and consumer sectors, encouraging investment and consumption momentum to support economic stability.
Experts indicate that the continued reduction of MLF usage demonstrates a shift in the central bank's monetary strategy, focusing on diversifying the use of policy tools like government bond purchases and reverse repurchase agreements to smooth liquidity fluctuations. Since March, the PBOC has regularly reduced the volume of MLF, suggesting a strategic downgrading of its role in the monetary policy framework to enhance flexibility and precision in policy steering.
The PBOC's recent monetary policy report underscores the necessity for a market-oriented rate formation mechanism, stressing the importance of using the central bank's policy rates as a guide. It also suggests strengthening the self-regulation of deposit rates while enhancing financial institutions' ability to price autonomously and rationally, aimed at achieving stable corporate financing and credit costs for residents. The efforts to streamline monetary policy mechanisms and study the rate corridor’s narrowing are part of broader reforms to guide money market rates to move smoothly around policy rate benchmarks.