SHANGHAI (Reuters) – China’s central bank on Monday lowered borrowing costs for its medium-term loans for the first time since April 2020, defying market expectations, to cushion any economic slowdown.
The People’s Bank of China (PBOC) said it cut the interest rate on 700 billion yuan ($110.19 billion) of one-year Medium Term Lending Facility (MLF) loans to some financial institutions by 10 basis points to 2.85% from 2.95. % in previous operations.
34 out of 48 traders and analysts, or 70% of all respondents, in a Reuters poll last week, expected no change in the multilateral fund’s rates, even though a growing number of market participants are beginning to anticipate a rate cut.
With 500 billion yuan of Multilateral Fund loans maturing on Monday, the operation resulted in 200 billion yuan of new money being pumped into the banking system.
The central bank also cut borrowing costs for seven-day reverse repo agreements, or repo, by the same margin to 2.10% from 2.20%, when it provided another 100 billion yuan of reverse repo to the banking system on the day, compared with 10 billion worth From this short-term liquidity instrument on Monday.
(dollar = 6.3524 Chinese yuan)
(Reporting by Winnie Zoe and Andrew Galbraith; Editing by Christian Schmolinger)