China central bank cuts key interest rate to boost economy

China’s central bank on Thursday cut a key interest rate and injected $33 billion into financial markets in a bid to boost flagging growth in the world’s second-largest economy.

The medium-term lending facility (MLF) rate — the interest for one-year loans to financial institutions — was lowered 10 basis points to 2.65 percent, the People’s Bank of China said in a statement.

The PBOC also said it was offering 237 billion yuan of funds to banks through the medium-term lending facility, “to maintain reasonable and sufficient liquidity in the banking system”.

Thursday’s move comes after the bank announced a surprise cut in a short-term interest rate earlier this week, which analysts said reflected growing concern about the state of the economy among Chinese policymakers.

The MLF rate guides the benchmark lending rate for households, businesses and mortgages, which is set to be announced next week.

Chinese authorities have announced a series of lacklustre economic indicators in recent months, pointing to a slowdown in the country’s post-Covid recovery.

Inflation rose only 0.2 percent on-year in May, while factory activity contracted for the second consecutive month.

Beijing has kept interest rates low compared with other major economies, but the near-zero inflation highlights challenges faced by policymakers as they try to stimulate growth.