PBOC said to lower medium-term interest rates for China's banks

[BEIJING] China's central bank offered to reduce the medium-term borrowing costs it charges lenders for the second time this year, according to a person with direct knowledge of the matter.

The People's Bank of China (PBOC) has told banks it can provide cash through its medium-term lending facility at 2.85 per cent for six-month loans, down from 3 per cent, and 3 per cent for one-year borrowing, down from 3.25 percent, according to the person, who asked not to be identified because the plans aren't public.

Such a reduction would amount to a kind of monetary easing outside of traditional tools such as lowering the benchmark lending or deposit rates or the required-reserve ratio for the biggest banks.

Overuse of RRR cuts may add too much pressure on short-term interest rates and would therefore be bad for stabilizing capital flows and the exchange rate, PBOC researcher Ma Jun said in a China Business News report published last month.

The PBOC didn't immediately respond to request for comment.

BLOOMBERG