China cuts medium-term borrowing costs by 20 basis points, steps up pandemic fight

SHANGHAI, April 15 (Reuters) – China’s central bank on Wednesday lowered the interest rate on its medium-term financing for financial institutions to the lowest level on record, in an effort to combat the economic fallout from the Chinese health crisis. coronavirus.

The move is expected to pave the way for a similar reduction in the country’s benchmark prime lending rate (LPR), which will be announced on the 20th, to lower the costs of financing businesses affected by the pandemic.

The People’s Bank of China (PBOC) has announced that it is reducing one-year medium-term loans (MLFs) to financial institutions to 2.95%, the lowest level since the introduction of the liquidity tool in September 2014, down 20 basis points from 3.15% previously.

The decline is broadly in line with market expectations, as economists believe the central bank would keep its yield curve stable by lowering the MLF rate by the same margin as the cut in the 7-day repo rate in late March.

And a lower MLF rate should encourage commercial banks to lower the lending benchmark, as the cost of medium-term lending is now used as a guide for the LPR.

Global central banks have rolled out unprecedented stimulus measures in recent weeks, slashing rates sharply and injecting trillions of dollars to support their economies as many countries have been placed under tight restrictions to contain the pandemic .

The PBOC said in a statement that it was injecting 100 billion yuan ($ 14.19 billion) through the liquidity tool.

There are no MLF loans that expire on this day, although a 200 billion yuan batch of such loans matured on Friday.

Another 267.4 billion yuan of targeted medium-term loans is expected to expire on April 24, with many traders expecting the central bank to renew them and reduce the interest rate accordingly. ($ 1 = 7.0476 Chinese yuan) (Reporting by Winni Zhou and Andrew Galbraith in Shanghai, Lusha Zhang in Beijing Editing by Shri Navaratnam)

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