People's Bank of China to boost liquidity with Medium-term Lending (MLF) injection today

<p>The People's Bank of China will be setting its Medium-term Lending Facility (MLF) rate today. </p><ul><li> the interest rate on the MLF loans currently stands at 2.5%</li><li>650 billion yuan ($91.11 billion) worth of the MLF loans mature today and the Bank is expected to inject a greater amount than this in order to boost bank liquidity</li><li>due around 0115 GMT.</li></ul><p>The 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. Thart is, its a rate for the PBOC to provide medium-term liquidity to commercial banks.</p><ul><li>The rate is normally 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>I've seen basically no expectations of a rate change for this today.</p><p>The MLF rate sets the scene for the monthly Loan Prime Rate (LPR) setting on the 20th. Current LPRs:</p><ul><li>3.45% for the one year</li><li>4.20% for the five year</li></ul><p>Also from China today:</p><ul><li><a href="https://www.forexlive.com/news/economic-calendar-in-asia-15-december-2023-chinese-economic-activity-data-for-november-20231214/" target="_blank" rel="follow" data-article-link="true">Economic calendar in Asia 15 December 2023 – Chinese economic activity data for November</a></li></ul>

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