The Medium-term Lending Facility (MLF) has been rolled over with increased volume for seven consecutive months.
On September 24th, the People’s Bank of China announced that to maintain ample liquidity in the banking system, on Thursday, September 25th, 2025, it will conduct a 600 billion yuan MLF operation using a fixed quantity, interest rate bidding, and multiple price winning method, with a maturity of one year.
Given that 300 billion yuan in MLF matured this month, the central bank’s net MLF injection for September amounted to 300 billion yuan.
Simultaneously, the central bank also conducted net injections of medium to long-term funds through outright reverse repo operations in September. The central bank conducted two outright reverse repo operations on September 5th and September 15th, injecting 1 trillion yuan and 600 billion yuan in medium to long-term funds respectively, achieving a net injection of 300 billion yuan.
Following the reserve requirement ratio cut in May, the central bank has continued to conduct Medium-term Lending Facility and outright reverse repo operations, resulting in a net injection of medium-term liquidity.
An analysis indicates that after the May RRR cut released 1 trillion yuan in long-term liquidity, medium-term liquidity has been in a state of net injection for the past four months, with the scale of net injection significantly expanding in the last two months. This is primarily due to three reasons. First, this period coincides with the peak issuance period for government bonds, while regulators are also guiding financial institutions to increase credit supply. The central bank’s continuous injection of medium-term liquidity reflects coordination between monetary and fiscal policy, facilitating the smooth issuance of government bonds and better meeting the credit financing needs of businesses and households. Second, influenced by factors such as market expectations being affected by anti-internal competition measures and a strengthening stock market, medium to long-term market interest rates have generally risen recently, leading to some tightening of liquidity in the banking system. The central bank’s increased fund injections through policy tools like the MLF help stabilize market expectations and maintain ample market liquidity. Third, the central bank’s continued implementation of net medium-term liquidity injections also signals the ongoing strengthening of quantitative monetary policy tools, indicating that monetary policy maintains a supportive stance.
