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China's central bank keeps key rates unchanged, moderates liquidity withdrawal

TraderKnows
TraderKnows
06-17

The People's Bank of China announced on Monday that the interest rates will remain unchanged and conducted liquidity withdrawal operations.

China's central bank on Monday kept key policy rates unchanged as expected while renewing maturing medium-term loans and withdrawing some funds from the banking system.

The People's Bank of China (PBOC) announced that it maintained the one-year medium-term lending facility (MLF) rate at 2.50%, consistent with previous operations. This decision met market expectations, with 30 out of 31 market analysts surveyed by Reuters (97%) predicting that the PBOC would keep the MLF rate unchanged.

This month, 237 billion yuan of MLF loans matured, and the central bank's operation resulted in a net withdrawal of 55 billion yuan. This move reflects the central bank's balance between controlling market liquidity and maintaining financial stability.

Additionally, the central bank injected 4 billion yuan through seven-day reverse repo operations, with borrowing costs maintained at 1.80%. In a statement on its website, the central bank explained that this measure was aimed at maintaining reasonable and sufficient liquidity in the banking system while reducing volatility in the financial markets.

This operational mode demonstrates the central bank's cautious approach to monetary policy, intended to prevent market overheating while avoiding negative impacts on economic growth. By keeping the MLF rate unchanged and conducting moderate liquidity withdrawals, the central bank aims to maintain stability in the financial markets amid a complex economic environment.

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Interest rate

Interest rates are one of the most crucial variables in the financial markets, affecting the economic decisions of individuals, businesses, and governments. In a broader sense, interest rates are defined as the cost of borrowing or the price of using funds, usually expressed as a percentage in the form of an annual interest rate. The level of interest rates directly influences economic investment, consumption, savings, and the overall rate of economic growth.

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