Chinese Central Bank Publishes New Liquidity Tools

China’s central bank has published details on its latest tool to provide liquidity as banks from Goldman Sachs Group Inc. to Australia & New Zealand Banking Group Ltd. (ANZ) see a rate cut as unlikely.

The People’s Bank of China confirmed it pumped 769.5 billion yuan ($126 billion) into the country’s lenders in the last two months through a newly-created Medium-term Lending Facility. The PBOC injected 500 billion yuan in September and another 269.5 billion yuan in October via the facility — all termed at three months with an interest rate of 3.5 percent.

The announcement, included in the PBOC’s quarterly monetary policy statement, is the first official confirmation of earlier reports on the injections. The facility is the latest unconventional liquidity tool as the PBOC joins the European Central Bank on a path of easing even as the U.S. begins the shift to a more normal monetary policy.

The operation so far is equivalent to a 75-basis-point cut in the required reserve ratio, according to ANZ. The central bank has left reserve requirements for the largest banks and benchmark interest rates unchanged for more than two years.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza