On Wednesday morning, the People's Bank of China decided to keep the one-year Medium-Term Lending Facility (MLF) interest rate unchanged at 2.0% for December, following its commitment earlier this week to take further stimulus measures to assist in the recovery of domestic demand and to stimulate the struggling economy.
At the same time, the People's Bank of China injected liquidity of 300 billion yuan through the one-year Medium-Term Lending Facility, thus completing a series of economic stimulus measures taken recently after the latest growth and inflation data, which showed a clear slowdown in demand and activity.
It is worth mentioning that the MLF rate set by the People's Bank of China is usually a benchmark interest rate that is higher than the standard Loan Prime Rate (LPR), allowing banks in China to borrow funds from the People's Bank of China for periods ranging from 6 months to one year.
Markets often gauge potential changes the People's Bank of China may or may not make to the LPR based on the decisions regarding the Medium-Term Lending Facility, which is determined by the People's Bank of China later in the month.
