Central Bank Reduces MLF Volume to 300 Billion Yuan, Interest Rate Unchanged
On December 25, the Central Bank conducted a 300 billion yuan operation of Medium-term Lending Facility (MLF), maintaining the interest rate at the same level. This marks the Central Bank's continuous reduction in MLF volume for five consecutive months. According to the announcement from the Monetary Policy Department of the People's Bank of China, the MLF operation has a one-year term, with a maximum bidding interest rate of 2.30%, a minimum bidding interest rate of 1.90%, and an awarded interest rate remaining at 2.00%, unchanged from the previous month.
Prior to this operation, 14,500 billion yuan of MLF was set to mature on December 16, resulting in a net withdrawal of 11,500 billion yuan by the Central Bank. The current balance of the Medium-term Lending Facility has reached 50,890 billion yuan.
In this week’s funding outlook, Zheshang Securities noted that the Central Bank is leaning towards "supportive measures without excessive easing" regarding liquidity. The market is paying attention to whether the Central Bank will initiate a reserve requirement ratio (RRR) cut before and after the MLF renewal. Although the probability of an RRR cut corresponding to the 14-day funds not being injected remains relatively high, fiscal spending is also expected to positively impact liquidity. Despite potential disturbances to liquidity around the year-end, the ultimate effects may be limited.
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