China's Central Bank Keeps Benchmark Interest Rate Unchanged

The People's Bank of China (PBOC) kept its benchmark policy interest rate unchanged and withdrew billions of yuan in liquidity from the financial system through a medium-term lending facility. Today, the central bank provided 900 billion yuan, or approximately $124.26 billion, in liquidity to the banking system through the one-year medium-term lending facility (MLF), maintaining the interest rate at 2.00%.

In this monthly operation, the PBOC offered 900 billion yuan ($124 billion) in policy loans, resulting in a net withdrawal of 550 billion yuan from the market after accounting for the 1.45 trillion yuan maturity in November.

In recent months, Chinese authorities have implemented a practice more aligned with those of Western central banks by resetting the PBOC's seven-day reverse repo rate as the primary policy rate, allowing shorter-term operations to play a larger role in managing liquidity.

Economists say that the cash drain through the MLF facility has facilitated this shift. As officials strive to boost credit demand and revitalize financial markets, it is likely that the central bank will continue its easing measures. Standard Chartered economist Hunter Chan mentioned that lenders are maintaining calls for a 25-basis-point reduction in reserve requirement ratios to meet liquidity demand. Chan also noted that the PBOC could increase the size of direct reverse repo operations and net purchases of government bonds.