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China cuts rates on policy loans for first time since April 2020 -Breaking

by Mike Robinson

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© Reuters. FILEPHOTO: Beijing is seen as China’s new coronavirus outbreak hits. The People’s Bank of China headquarters can be seen in Beijing. REUTERS/Jason Lee

SHANGHAI, (Reuters) – China’s central banking cut Monday the borrowing cost of medium-term loans. This was the first such reduction since April 2020. It defied market expectations and sought to offset any slowdown in the economy.

People’s Bank of China (PBOC), announced that it would lower the interest rate for 700 billion yuan (or $1110.19 Billion) of medium-term loans (MLFs) to financial institutions of up to 2.85%, from 2.95% previously.

Thirty-four percent of 48 analysts and traders polled last week by Reuters predicted that there would be no changes to MLF rates. However, a growing number of participants in the market are beginning to predict a cut.

The operation saw 500 billion yuan in MLF loans mature on Monday. This resulted in a net of 200 billion yuan for fresh funds into the banking sector.

Also, the central bank lowered borrowing costs for seven-day reverse purchase agreements (or repos) by the same margin, to 2.10%. This was after it added 100 billion Yuan worth reverse repos into its banking system, as opposed with the 10 billion short-term liquidity tools due Monday.

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