China's PBOC Maintains Midterm Interest Rate Despite Economic Challenges
Despite the bumpy economic recovery in China, the Chinese central bank (PBOC) on Monday kept an important midterm interest rate unchanged, as expected. The central bank maintained the rate for one-year midterm loans (MLF) at 2.50 percent. The key MLF rate serves as a benchmark for the actual Loan Prime Rate (LPR), through which the PBOC controls the costs of consumer loans and mortgages. As MLF loans amounting to 103 billion yuan are due this month, the operation results in a net outflow of three billion yuan from the banking system. In addition, the central bank injected 129 billion yuan into the market through seven-day reverse repo agreements, keeping the interest rate unchanged at 1.80 percent. The PBOC's decision to keep interest rates stable indicates a cautious stance by the monetary authorities, even though the economy could use more economic stimulus. Since the strict COVID-19 measures ended in late 2022, the People's Republic has struggled to return to the robust economic growth seen before the pandemic.
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