MLF Resets Focus on Medium- and Long-Term Liquidity Supply with Interest Rate Cut

**[MLF Reverts to Positioning as a Medium- and Long-term Liquidity Supply Tool]**: After the signals of reserve requirement ratio (RRR) cuts and interest rate reductions were released, the Medium-term Lending Facility (MLF) interest rate led the way in declining, marking the effectiveness of incremental financial policies. On the 25th, the People's Bank of China (PBOC) announced on its official website under the "Medium-term Lending Facility" section that it had conducted a 300 billion yuan MLF operation with a maturity of one year. The highest bid rate was 2.30%, the lowest was 1.90%, and the winning bid rate was 2.00%, representing a 0.3 percentage point decline from the previous month. This operation incorporates several new changes, highlighting a new approach in monetary policy and signaling the reversion of MLF to its positioning as a medium- and long-term liquidity supply tool.

Chief Researcher Dong Xiliao of China Merchants Union Consumer Finance Co., Ltd. noted that after a 30 basis point decline, the enthusiasm of financial institutions to bid for MLF might increase. The decline in the MLF interest rate will help further reduce the funding costs of financial institutions and effectively meet the market's medium- and long-term liquidity needs.