China\'s central bank unexpectedly reduced the medium-term lending facility rate by 20 basis points for the first time since August, after cutting several benchmark lending rates on Monday.
The People\'s Bank of China cut the rate on one-year medium-term lending facility to 2.3 percent from 2.5 percent on Thursday. The bank injected CNY 200 billion into the market via MLF.
The off-schedule MLF rate cut came days after lowering the seven-day reverse repo rate and loan prime rate by 10 basis points each.
Routine MLF loan operations are conducted in the middle of each month and the PBoC had kept rates on both the MLF and reverse repos operations unchanged on July 15.
Markets were expecting a 10 basis point reduction in MLF at its next operation in August.
The PBoC also conducted CNY 235.1 billion of seven-day reverse repos at an interest rate of 1.7 percent today.
The bank said the latest action will keep reasonable and ample liquidity in the banking system.
ING economist said the timing and the scale of reduction of MLF surprised the markets, ING economist Lynn Song said. Given the broader direction of monetary policy easing and needs from the real economy, there was no need to wait, the economist noted.
\"A larger cut to the MLF relative to the LPR could also provide some support to banks\' interest margins, though it is possible that the LPR may be further lowered as an immediate impact from the MLF cut instead,\" Song added.