The central bank of China cut the interest rate on its medium-term lending facility (MLF) on Tuesday. This is the first MLF rate cut in three years imposed by policymakers as a way to beef up the economy as global economic growth slows down.
Interest rate cuts were seen by some economists as a good indicator of the policymakers having a more proactive role in the economy.
The People’s Bank of China (PBOC) announced its rate cut on its one-year MLF loans to financial institutions by 5 basis points, making it 3.25% from the steady 3.30% in three years.
This key loan rate could also reduce Loan Prime Rate (LPR) in the coming weeks as it is linked to the MLF rate and is published on the 20th of each month.
“They tried to maneuver in a limited space…it does not change the overall picture that aggressive easing is not on the table. On the micro-level, there’s still some targeted support from policymakers,” he said.