China’s central bank has allowed the cost of one-year MLF funding for some banks to fall to 1.45% in May, according to Bloomberg, marking a new low for the facility. The rate was around 1.5% in April, meaning the latest move represents a decline of roughly 5 basis points. This is not a broad rate-cut cycle by itself, but it suggests Beijing is using cheaper bank funding to support an economy that is losing momentum.

The medium-term lending facility is a tool the People’s Bank of China uses to provide liquidity to banks against collateral. In May, the PBOC announced a 600 billion yuan one-year MLF operation, while 500 billion yuan was due to mature, creating a net liquidity injection of about 100 billion yuan. Since the facility now uses a fixed-quantity, multiple-price auction model, different banks may receive funding at different rates. That means 1.45% should be treated as a reported low rate, not a single official market-wide benchmark.

The broader message is cautious easing. China kept its main loan prime rates unchanged in May, with the one-year LPR at 3.00% and the five-year LPR at 3.50%. The PBOC appears to be lowering funding pressure on banks without yet delivering a more aggressive monetary stimulus package.