People's Bank of China Cuts MLF Rate by 0.1%p... Countdown to Benchmark Rate Cut

[Asia Economy Reporter Naju-seok] The People's Bank of China, the central bank of China, abruptly cut the policy fund interest rate on the 17th.

On the same day, the People's Bank of China lowered the 1-year Medium-term Lending Facility (MLF) loan rate from the existing 3.25% to 3.15%, a decrease of 0.10 percentage points. The liquidity supplied to the market through this MLF is about 200 billion yuan (33.9 trillion won).

Foreign media predict that the Loan Prime Rate (LPR), which serves as China's benchmark interest rate, is also likely to be lowered through this measure. The LPR is scheduled to be announced on the 20th.

China receives the LPR calculated based on the MLF rate from 18 commercial banks and then discloses the average.

Since Chinese financial institutions use the LPR as the standard for general loan operations, a decrease in the LPR rate has the same effect as a benchmark interest rate cut.

In addition, the People's Bank of China supplied 100 billion yuan to the market through reverse repurchase agreements (reverse repos) on the same day.