Chinese Central Bank Applies First Ever Cut to Rates for Medium-term Lending Facilities

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The People’s Bank of China (PBOC) has cut one of its key interest rates in a sign that Beijing will adopt further measures to prop up slowing growth.

On Tuesday PBOC cut the one-year rate for the medium-term lending facilities (MLF) it uses to lend to commercial banks from 3.30% to 3.25%, for the first cut since the rate’s launch three years ago.

Analysts say the move shows China’s determination to reduce borrowing costs, and could presage further cuts in future.

“The cut could well precede reductions to the rates on the rest of the PBOC’s lending facilities,” said Julian Evans-Pritchard, senior China economist at Capital Economics, in a research note.

Evans-Pritchard said the cut should result in a reduction in China’s recently launched Loan Prime Rate (LPR), which is intended to replace the fixed benchmark lending rate and calculated based on the rates of a cohort of key banks.

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