FX.co ★ PBoC to Further Erode Role of MLF Rate

The People's Bank of China (PBoC) announced on Monday a new approach to the distribution of its medium-term loans. From this month onward, the central bank will employ a fixed-quantity, interest-rate bidding, and multiple-price bidding methodology for its MLF loan operations. Transitioning to the seven-day reverse repo rate as its primary policy rate, the PBoC is steadily diminishing the role of interest rates associated with other bond instruments. Furthermore, the PBoC disclosed plans to issue CNY 450 billion in one-year medium-term lending facility (MLF) loans on Tuesday. In recent developments, China's central bank signaled its intention to lower banks' reserve requirement ratio and interest rates when deemed appropriate.