China’s central bank stepped up its support of the economy with an increased injection of liquidity into the financial system, even as it kept a key lending rate unchanged.
The People’s Bank of China Monday injected 789 billion yuan ($108 billion) worth of liquidity into the banking system via its one-year medium-term lending facility at an interest rate of 2.5%, the same rate as at its previous operation.
The size of the MLF operation was the biggest since November 2022, and more than offset the CNY500 billion worth of MLF loans due Monday, according to Wind, a local data provider.
The increased liquidity injection was necessary to meet fund shortages resulting from increased issuance of local government debt, new bank loans and expected tax collection in October, Wen Bin, an economist at China Minsheng Bank, said in a note.
Meanwhile, the decision to hold the MLF rate steady suggested China’s benchmark lending rates will also remain unchanged this month, as lenders use MLF rates to price their loan prime rates. The PBOC will release the benchmark LPR on Friday.
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