China’s central bank has increased its liquidity support to the banking system by extending medium-term policy loans on Monday.

However, it has chosen to keep interest rates unchanged, primarily due to concerns about the potential for a significant depreciation of the yuan.

The People’s Bank of China (PBOC) is currently navigating a delicate balancing act, Reuters reported.

It aims to maintain ample liquidity to support a struggling economy while also working to stabilize the yuan amidst expectations of sustained higher U.S. interest rates.

In a statement, the PBOC announced that it has conducted medium-term lending facility (MLF) operations amounting to 789 billion yuan ($107.96 billion) to ensure adequate liquidity in the banking system.

With 500 billion yuan in maturing MLF loans, the PBOC is injecting a net total of 289 billion yuan in fresh liquidity into the banking system, marking the most substantial such addition in nearly three years.

Simultaneously, the central bank has maintained the interest rate on one-year policy loans at 2.50%, aligning with a Reuters poll from the previous week.

Written by staff