Central bank confirms liquidity injection via new tool

China's central bank on Thursday confirmed that it has injected 769.5 billion yuan (126.15 billion U.S. dollars) into commercial banks via a new tool in the past two months.

The new liquidity management tool, called medium-term lending facility (MLF), was introduced in September, said the People's Bank of China in its third-quarter monetary report.

MLF allows extension and resetting of interest rates upon maturity, a clear hint that the central bank has started to use price-based monetary policy tools, according to the China International Capital Corporation (CICC), a leading investment bank in China.

More liquidity into the market means relatively loose monetary policies and lower interest rates in lending.

The MLF will last for three months with an interest rate of 3.5 percent. It is expected to boost the real economy by lowering lending rates and cutting costs for enterprises in fundraising.

The report said that the Chinese economy is running within a reasonable range while facing certain downward pressure.

The central bank will continue to implement prudent monetary policies and maintain the continuity and stability of policies, while fine tuning in a timely and proper manner, the report said.