China central bank cuts short-term loans for first time since April 2020

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China central bank cuts short-term loans for first time since April 2020

SHANGHAI, Jan 17, Reuters -- China's central bank has cut its medium-term loans for the first time since April 2020, defying market expectations, to cushion any economic slowdown.

The People's Bank of China PBOC said it was lowering the interest rate on 700 billion yuan $110.19 billion worth of one-year medium-term lending facility MLF loans to some financial institutions by 10 basis points to 2.85% from 2.95% in previous operations.

Thirty-four out of the 48 traders and analysts, or 70% of the participants, predicted no change to the MLF rates, although a rising number of market participants start to predict a rate cut.

The operation resulted in a net 200 billion yuan of fresh fund injections into the banking system with 500 billion yuan worth of MLF loans maturing on Monday.

The central bank also lowered the borrowing costs of seven-day reverse repurchase agreements, or repos, by the same margin to 2.10% from 2.20%, when it offered another 100 billion yuan worth of reverse repos into the banking system on the day, compared to 10 billion worth of the short-term liquidity tool due on Monday.