The People's Bank of China Holds MLF Rate Steady for Two Consecutive Months

The People's Bank of China announced on the 25th that it will keep the one-year Medium-term Lending Facility (MLF) rate unchanged at 2.0%.

The central bank stated, "To maintain reasonable and sufficient liquidity in the banking system, we have initiated MLF operations amounting to 900 billion yuan with a one-year term," adding, "The minimum bid rate is 2.30%, and the winning bid rate is 2.00%." As a result, the MLF balance reached 6.239 trillion yuan.

People's Bank of China. Yonhap News Agency

According to Bloomberg, the market had expected the MLF rate to remain steady this month. Previously, on September 1, the People's Bank of China cut the one-year MLF rate by 0.3 percentage points.

The MLF is a liquidity adjustment tool through which the People's Bank of China lends funds to commercial banks.

US economic broadcaster CNBC explained that the rate freeze was a measure to stabilize pressure on the yuan, which has been weakening ahead of the return of President-elect Donald Trump to the White House.

Bruce Pang, Chief Economist for Greater China at JLL, said, "Considering that market liquidity remains sufficient, this was a fully expected move," adding, "Freezing the MLF rate allows for greater policy flexibility during the transition of the US administration."

Jiwei Zhang, Chief Economist at Pinpoint Asset Management, predicted that the People's Bank of China will maintain the rate until the new US administration takes office in January next year. He stated, "The strong rise of the dollar is putting pressure on other currencies, including the yuan," and "The People's Bank of China is unlikely to rush into a rate cut at this time."