China's central bank pumps liquidity into market via MLF

BEIJING — China's central bank Friday injected fresh funds via its medium-term lending facility (MLF) to keep liquidity stable.

The People's Bank of China pumped 404 billion yuan ($61.15 billion) into the financial system via MLF. The interest rate for one-year MLF loans was unchanged at 3.2 percent, the central bank said in a statement on its website.

The central bank also suspended daily reverse repo sales for a second day, which drains 90 billion yuan from the market as the same amount of reverse repos matured on Friday.

The MLF tool was first introduced in 2014 to help commercial and policy banks maintain liquidity by allowing them to borrow from the central bank by using securities as collateral.

Maturing MLF will withdraw a total of 396 billion yuan from the market this month, including 207 billion yuan of MLF due for Friday.

The PBOC's open market operations are closely watched by the market, as they have become major tools for the central bank in pursuing its monetary policy.

China set the tone of its 2017 monetary policy as prudent and neutral, keeping appropriate liquidity levels but avoiding excessive liquidity injections.

Such a policy stance is crucial for China as it has to juggle the task of financial deleveraging, aimed at defusing risk and curbing asset bubbles, while shoring up the economy.