Many market watchers believe the PBOC will adjust its money market rates in early August if the US Federal Reserve cuts its key rate, as widely expected, on July 31 BEIJING: China’s central bank offered medium-term loans to financial institutions on Tuesday in an attempt to get more affordable funds to struggling smaller firms, as it steps up efforts to support a slowing economy. With growth in China sliding to a near 30-year low, global financial markets are closely watching to see if the People’s Bank of China (PBOC) will trim interest rates soon in line with expected easing by other central banks. While the PBOC left rates on the medium-term loans unchanged on Tuesday, and the injection had been expected, it funneled more lower-cost funds into a credit program aimed specifically at reducing strains on small and medium-sized businesses. The PBOC lent 497.7 billion yuan ($72.31 billion), including 200 billion yuan through one-year medium-term lending facility (MLF) loans and another 297.7 billion yuan through targeted medium-term lending facility (TMLF) loans, it said in a statement. The size of the TMLF funding was 11 percent larger than the last such injection in April. Interest rates for both liquidity facilities were unchanged from previous levels. The one-year MLF and TMLF remained at 3.30 percent and 3.15 percent, respectively. The total amount roughly offset 502 billion yuan of MLF loans that were set to expire on Tuesday, ensuring a steady supply of cash. “Replacing some MLF with TMLF effectively cut funding costs. We should focus on the lower rate, instead of the net drainage on the day,” said Frances Cheung, head of Asia macro strategy at Westpac in Singapore.The central bank said banking system liquidity will be “reasonably ample” after the lending operations. About 160 billion yuan in reverse repos were also set to expire on Tuesday, according to Reuters calculations based on official data. The PBOC did not say in its statement whether it had drained funds from money markets on Tuesday.Some traders said Tuesday’s moves were in line with the PBOC’s support measures since last year, which have been aimed at getting more affordable financing to small and private companies. While Chinese regulators have urged banks to keep lending to distressed firms, such companies are often considered higher credit risks than big, state-owned enterprises. Traders and analysts still expect the PBOC to cut rates on some of its liquidity tools in coming months. The PBOC has already slashed banks’ reserve requirement ratios (RRR) six times since early 2018 to free up more money to lend, while guiding short-term market rates lower through liquidity injections in various forms. Many market watchers believe the PBOC will adjust its money market rates in early August if the US Federal Reserve cuts its key rate, as widely expected, on July 31. Cheung from Westpac said it was still possible the PBOC could lower the MLF rate after the Fed’s policy decision. She also has pencilled in a 50 basis-point RRR cut this quarter, and another in the fourth quarter.