China’s central bank on Wednesday cut the interest rate on its medium-term funding for financial institutions to the lowest level on record, in an attempt to combat the economic fallout from the coronavirus health crisis, reported Reuters.
The move should pave the way for a similar reduction to the country’s benchmark loan prime rate (LPR), which will be announced on the 20th, to lower financing costs for companies hit by pandemic.
The People’s Bank of China (PBOC) said it was lowering the one-year medium-term lending facility (MLF) loans to financial institutions CNMLF1YRRP=PBOC to 2.95%, the lowest level since the liquidity tool was introduced in September 2014, down 20 basis point from 3.15% previously.
The cut came largely in line with market expectations, as economists believe the central bank would keep its yield curve steady by lowering the MLF rate by the same margin as the cut to the 7-day reverse repo rate in late March.