China Retains MLF Rate, Withdraws Largest Cash Since 2014

The People’s Bank of China (PBoC) launched a total of CNY 300 billion into financial institutions via a one-year medium-term lending facility (MLF) on December 25th at an unchanged rate of 2.0%.

That compared with CNY 1.45 trillion of MLF loans due this month, marking a net cash withdrawal of CNY 1.15 trillion, the most since 2014.

It was the third consecutive month of a steady MLF rate following a record 30bps reduction in September.

Policymakers in early December vowed a "moderately loose" monetary policy, the first change in stance in 14 years, alongside "more proactive" fiscal measures to aid the economy.

However, they have yet to reveal any details, anticipating the potential higher tariffs by President-elect Donald Trump.

In recent months, the PBoC has reduced the role of the MLF as the main policy rate, opting instead to use the 7-day reverse repo rate to influence market borrowing costs.

The 7-day rate has remained steady at 1.5% since a 20bps cut in late September.