PBOC Cuts MLF and Reverse Repo Rates by 10 Basis Points, First MLF Cut Since April 2020

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The Chinese central bank has cut rates for its open market operations instruments, as concerns mount over the potential impacts of Omicron upon the economy in the lead up to the 2022 Beijing Winter Olympics.

The People’s Bank of China (PBOC) undertook 700 billion yuan in medium-term lending facility (MLF) operations on 17 January, at a rate of 2.85%, alongside 100 billion yuan in 7-day reverse repo operations at a rate of 2.10%.

The rates mark a decline of 10 basis points compared to PBOC’s previous round of open market operations.

The MLF cut marks the first reduction in the Chinese policy rate since April 2004, with domestic analysts pointing to efforts to stabilise decelerating credit growth, with an especial focus on lending to the real economy.