Loans

China set to cut interest rates on standing lending facility loans – sources

China set to keep borrowing cost of medium-term loans unchanged
Written by Publishing Team

SHANGHAI (Reuters) – China will cut interest rates on Friday on a key monetary policy tool through which financial institutions can obtain temporary liquidity from the central bank, three sources familiar with the matter said.

The 10 basis point cut in interest rates on the Permanent Lending Facility (SLF) comes on the heels of a series of key rate cuts in China, as Beijing eases monetary policies to stabilize a slowing economy.

China’s economy grew by 4% in the fourth quarter – the slowest rate in a year and a half – as growth loses momentum due to a slump in the property market and weak consumption. Analysts expect more easing measures in the coming months.

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According to the sources, the borrowing cost on the overnight, seven-day and one-month special facility loans will be reduced by 10 basis points to 2.95%, 3.10% and 3.45%, respectively.

The People’s Bank of China did not immediately respond to a Reuters request for comment.

SLF was created by PBOC in 2013 to meet the temporary liquidity needs of financial institutions, and interest rates are determined by monetary policy trends and other money market rates in China.

China on Thursday lowered principal interest rates (LPRs), benchmark rates for mortgages and other types of loans. On Monday, the People’s Bank of China (PBOC) lowered borrowing costs for its medium-term loans for the first time since April 2020.

Chinese banks can borrow SLF loans from the People’s Bank of China using eligible bonds and other credit assets as collateral.

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Additional reporting by Xiangming Hou and Ryan Woo in Beijing, Hongwei Li and Steven Bian in Shanghai; Editing by Jacqueline Wong and Simon Cameron Moore

Our Standards: Thomson Reuters Trust Principles.

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