PBOC Keeps Policy Rate Unchanged to Maintain Economic Stability

The People’s Bank of China (PBOC) opted to leave a key policy rate unchanged at 2.50% during the rollover of maturing medium-term lending facility (MLF) loans on Wednesday, aligning with market expectations.

Analysts suggest that the unchanged MLF rate demonstrates the central bank’s commitment to ensuring currency stability, despite an unexpected credit contraction in April that heightened the need for additional policy stimulus to bolster the country’s economy.

This move comes as the bank prepares for the finance ministry’s upcoming issuance of 1 trillion yuan in ultra-long-term special treasury bonds. The central bank announced that it would maintain the rate on 125 billion yuan ($17.28 billion) in one-year MLF loans to some financial institutions at 2.50% from the previous operation.

In the face of the yuan’s 1.9% decline against a strengthening U.S. dollar this year — attributed to its comparatively lower yields compared to other global economies — Beijing is planning to enhance economic support through monetary and fiscal measures, including potential reductions in interest rates and bank reserve requirement ratios (RRR), according to the Communist Party’s Politburo in late April.