People's Bank of China announces interest rate decision

The People's Bank of China has kept its policy rate unchanged.

In a statement from the PBoC, it was announced that the 1-year loan prime rate, which serves as the policy rate, will be held steady at 2.3 percent.

The bank injected 300 billion yuan (42.2 billion dollars) into the market at a 2.3 percent interest rate through the Medium-term Lending Facility (MLF). However, since 401 billion yuan (56.3 billion dollars) in previously issued loans matured on August 15, there was a net cash withdrawal of 101 billion yuan (14.1 billion dollars) from the banking system.

The PBoC had lowered its policy rate from 2.5 percent to 2.3 percent in July.

Analysts assessed that the PBoC is maintaining a prudent monetary policy to prevent excessive demand for government bonds, despite the shrinking credit volume.

The MLF allows Chinese banks to obtain medium-term loans from the Central Bank in exchange for securities.