China’s Central Bank Conducts Second MLF Operation This Month, Unexpectedly Cuts Rates by 20 Basis Points

On Thursday, the People's Bank of China (PBOC) announced a 200 billion yuan Medium-term Lending Facility (MLF) operation through interest rate bidding, with a winning bid rate of 2.3%, down by 20 basis points from the previous rate. Industry insiders noted that this additional MLF operation signals an easing stance, addressing financial institutions' medium- to long-term funding needs. The timing of this MLF operation, scheduled after the monthly Loan Prime Rate (LPR) announcement, also indicates an intention to downplay the policy significance of the MLF rate.

Regarding the signals sent by this "additional MLF operation," Minsheng Macro believes it confirms the weakening policy role of MLF. Historically, such "unusual" operations by the central bank typically aim to stabilize expectations. Moreover, the central bank is seizing a crucial macroeconomic window to implement easing measures.