China's Central Bank keeps interest rates steady while injecting large amounts of cash into the market

In a statement from the PBoC, it was reported that 1 trillion 450 billion yuan was provided to banks through the MLF with a one-year maturity at a 2.5 percent interest rate, and 495 billion yuan was provided through reverse repo operations with a 7-day maturity at a 1.8 percent interest rate. The statement noted that the transactions aim to "maintain liquidity in the banking system at an adequate level," "offset the impact of short-term factors such as tax payment and government bond issuance schedules," and "keep the supply of the base currency at an appropriate amount in the medium and long term."

The MLF allows Chinese banks to receive medium-term loans from the Central Bank in exchange for securities. In reverse repo operations, the Central Bank injects cash into the market by purchasing securities with the agreement to resell them at a future date.

The bank's move is being evaluated as a sign that the government will turn toward monetary policies that encourage economic recovery against the pressure created by the decline in the real estate sector and the debt problems of local governments.

News Source: 12punto