In December, MLF continued net injection, and analysis suggests that the possibility of implementing a reserve requirement ratio cut in the first quarter cannot be ruled out

On December 25th, the People's Bank of China will conduct a 400 billion yuan MLF operation through a fixed quantity, interest rate bidding, and multiple price level bidding method, with a term of 1 year. According to Wind Information, 300 billion yuan of MLF will mature in December, so after the People's Bank of China conducts the 400 billion yuan MLF operation, there will be a net injection of 100 billion yuan, marking the 10th consecutive month that the People's Bank of China has increased the amount of MLF. In addition, the People's Bank of China will also net inject 200 billion yuan through reverse repos this month. This means that the net injection of medium-term liquidity in December will be 300 billion yuan.

According to previous operations by the People's Bank of China, from August to November, the net injection scale of reverse repos and MLF was 600 billion yuan each month, while this month it has decreased by 300 billion yuan. In this regard, Wang Qing, chief macro analyst at Dongfang Jincheng, believes that this may be due to a decrease in the net financing scale of government bonds in December compared to previous periods; at the same time, the possibility of the People's Bank of China implementing a reserve requirement ratio cut in the first quarter of 2026 to inject a large scale of long-term liquidity into the market cannot be ruled out.

Mingming, chief economist at CITIC Securities, stated that although the net injection scale has been reduced, the People's Bank of China's commitment to maintaining a moderately loose liquidity orientation has not changed. Considering the approaching year-end funding pressure, it is possible that the People's Bank of China may increase the scale of government bond purchases to hedge against seasonal fluctuations in liquidity at the end of the month. (Securities Daily)