SHANGHAI (Reuters) – China’s central bank said it cut interest rates on its permanent loan facility (SLF) in April, catching up with similar cuts in other liquidity tools as part of Beijing’s efforts to support the economy affected by the coronavirus.
In the first quarter monetary policy report released on Sunday, the People’s Bank of China (PBOC) said it cut SLF rates by 30 basis points on April 10, bearing borrowing costs on loans day to day, seven days and one month to 3.05. %, 3.2%, 3.55%, respectively.
The PBOC has put in place a series of measures to support the economy since the coronavirus epidemic, reducing policy rates and the amount that banks must hold in reserves with the dual objective of boosting the liquidity of the financial system and reduce financing costs.
In Sunday’s report, the PBOC said it would step up support for the economy and abandoned its long-held vow to refrain from “flood-like” stimulus measures, suggesting authorities were prioritizing growth and job creation as China grapples with its worst collapse in decades.
Premier Li Keqiang said at a recent cabinet meeting that the government aims to complete the issuance of another billion yuan of local government special bonds by the end of May.
Central bank downgraded one-year Medium Term Loan Facility (MLF) lending to financial institutions CNMLF1YRRP = PBOC twice this year by a total of 30 basis points to 2.95%, the lowest since the introduction of the liquidity tool in September 2014.
SLF loans have a shorter maturity and are different from MLF, which the PBOC uses to manage longer-term liquidity in the banking system and steers the Reference Lending Prime (LPR) rate.
The PBOC said the SLF rate serves as a cap on its interest rate corridor and provides short-term liquidity support based on demand from financial institutions, according to the report.
Reporting by Winni Zhou and Andrew Galbraith; Editing by Shri Navaratnam