People's Bank of China set MLF rate at 2.5% (prior 2.5%)

<p>The PBoC has kept the 1-year MLF interest rate unchanged at 2.5%</p><ul><li>injects cash via MLF for the 14th month in a row</li><li>adds net CNY 216bn</li></ul><p>This is a disappointment from the PBoC, the expectation was a cut to 2.4%:</p><ul><li><a href="https://www.forexlive.com/centralbank/peoples-bank-of-china-interest-rate-cut-expected-today-20240114/" target="_blank" rel="follow" data-article-link="true">People's Bank of China interest rate cut expected today</a></li></ul><p>The Medium-term Lending Facility (MLF) was last cut in August 2023, from 2.65%.</p><p>-</p><p>What is the MLF?</p><p>The PBOC's MLF rate is a benchmark interest rate that banks in China can use to borrow funds from the People's Bank of China for a period of 6 months to 1 year, as medium-term liquidity to commercial banks.</p><ul><li>The rate is typically announced on the 15th of each month. </li><li>The interest rate on the MLF loans is typically higher than the benchmark lending rate (more on these below), which encourages banks to use the facility only when they face a shortage of funds.</li><li>MLF loans are secured by collateral, which can be a wide range of assets including bonds, stocks, and other financial instruments. The collateral ensures that the PBOC can recover the funds if the borrower defaults on the loan.</li></ul><p>The MLF rate sets the scene for the monthly Loan Prime Rate (LPR) setting on the 20th 21st, because the regular 20th is a Sunday. Current LPR rates are:</p><ul><li>3.45% for the one year</li><li>4.20% for the five year</li></ul><p>People's Bank of China Governor Pan Gongsheng</p>

This article was written by Eamonn Sheridan at www.forexlive.com.