The Strategist

People's Bank of China injects 789 billion yuan into economy under MLF

10/17/2023 - 08:01

The People's Bank of China (PBOC), the nation's central bank, pumped 789 billion yuan ($108 billion) into the financial system as part of a medium-term lending facility (MLF) program.

According to the PBOC statement, the interest rate on one-year loans made under the MLF stayed at 2.5 percent. When the Central Bank last adjusted it in August, the difference was 15 basis points (bps).

October will see the expiration of loans totaling 500 billion yuan, meaning that net inflows into the financial system will come to 289 billion yuan. This is the highest since 2020, Trading Economics has notes.

In a seven-day reverse repurchase operation, the Chinese central bank also lent banks 106 billion yuan at an annualized rate of 1.8%. In August, there was a 10 bps decrease in the rate for these procedures.

The Chinese Central Bank uses MLF, its significant credit instrument, to give liquidity to commercial banks. MLF has a direct impact on LPR, the bank's main rate, which was elevated to the benchmark in the summer of 2019.