The People's Bank of China has lowered the 1-year Medium-term Lending Facility rate from 2.75 percent to 2.65 percent. This adjustment to the rate was announced just prior to the release of data that showed a fall in year-over-year growth in key activity indicators in May. These falls in year-over-year growth partly reflect the base effects of volatility associated with lockdowns in major Chinese cities 12 months earlier, but PMI survey data also indicate that conditions remain subdued in the Chinese economy.

Officials also lowered the 7-day reverse repo rate by 10 basis points to 1.90 percent earlier in the week. Officials advise that these adjustments to policy settings are designed to"keep the liquidity in the banking system adequate at a reasonable level" rather than signalling a major shift in the stance of monetary policy.

Comments from PBoC Governor Yi Gang published last week indicated that officials remain confident that both economic activity and price pressures will pick up in the second half of the year. He reiterated that monetary policy will be kept"stable" while arguing there is"ample policy room" to support economic recovery.

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