PBOC to shift MLF date to the 25th as part of policy framework overhaul

China’s central bank is set to move its one-year liquidity injection date to the 25th of each month, starting as early as August, according to sources cited by Bloomberg. This change, part of a broader policy framework overhaul, aims to decouple the Medium-term Lending Facility from the Loan Prime Rates.

Highlights of the article:

• MLF operations to move from the 15th to the 25th of each month
• Change supports PBOC’s transition to using 7-day reverse repo as main policy tool
• Shift likely to impact bank liquidity management
• Move aligns with PBOC’s plans to expand toolkit, including government bond operations

The PBOC’s recent unexpected MLF injection on June 25th, coupled with rate cuts, hinted at this upcoming change.

This policy adjustment reflects the PBOC’s efforts to align more closely with global central banking practices and enhance its influence over market borrowing costs. It should also make PBOC moves easier to understand.

This article was written by Adam Button at www.forexlive.com.