The People’s Bank of China (Pboc, the country’s central bank) left one of its key interest rates unchanged and withdrew some money from the banking system through a bond instrument. The medium-term interest rate (MLF) was left unchanged at 2.5 per cent.

Keeping the MLF rate unchanged underlines the central bank’s intention to maintain monetary stability amid a fragile economic recovery and tempered market expectations about the timing of the Federal Reserve’s (Fed) first interest rate cut this year. This is reported by
Agencia CMA, a partner of TV BRICS.

Weakening inflation, slowing credit growth and lower exports in March pointed to the need for additional stimulus to revive the world’s second-largest economy, analysts said.

In addition, the MLF rate serves as a benchmark for discounted lending rates (LPRs), and markets largely use the MLF rate as a precursor to changes in reference credit indices.

This month, 170 billion yuan (US$23.48 billion) worth of MLF loans expire, so the operation resulted in a net withdrawal of 70 billion yuan (US$9.67 billion) of funds from the banking system.

New bank loans grew less than markets expected in March compared to the previous month, while loan growth hit an all-time low.

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