(Yicai) Oct. 16 -- The People’s Bank of China enlarged the size of its medium-term lending facility by a sizeable 57.8 percent today, More expansions to this financing tool are likely before the end of the year as the central bank pumps additional liquidity into the banking system to drive economic growth, experts said.

The central bank released CNY789 billion (USD108 billion) of fresh funds into the financial system through one-year MLFs, CNY289 billion more than the amount that matured, but kept the rate unchanged at 2.5 percent, according to a statement on the PBOC website.

The central bank also injected CNY106 billion (USD14.5 billion) in seven-day reserve repo operations and kept the rate the same at 1.8 percent.

Increased demand for credit and greater local government bond issuance have meant that banks’ cash flow has tightened and this is the main reason why the amount of MLF loans increased by so much this month, said Wang Qing, chief macro analyst at Golden Credit Rating International.

The credit easing will last until the end of the year, with more expansions to the size of MLFs and additional RRR cuts likely, as this is an important way of supporting the current economic rebound, Wang said. The RRR cut last month and the expanded size of MLFs this month indicate that policies are taking effect, he added.

By hiking the size of MLF loans but keeping the interest rate the same, the central bank is sending a signal to financial institutions to keep supporting weak areas of the real economy, such as manufacturing, green development and other emerging fields, said Zhou Maohua, macro-financial researcher at China Everbright Bank.

“This month’s benchmark loan prime rate is very likely to remain unchanged as it is closely pegged to the MLF rate which stayed the same,” said Wen Bin, chief economist at China Minsheng Bank.

Editor: Kim Taylor