China central bank cuts a key loan rate for first time since 2016

China's central bank cut the interest rate on its medium-term lending facility (MLF) on Tuesday for the first time since early 2016, as policymakers work to prop up a slowing economy hit by weaker demand at home and abroad.

With growth cooling faster than expected and nearing 30-year lows, a number of economists worry there is a risk that Chinese policymakers may be falling behind the curve by moving too cautiously. But some analysts said Tuesday's reduction, though modest, may be a sign the central bank is turning more proactive.

The People's Bank of China (PBOC) said it was lowering the rate on its one-year medium-term lending facility (MLF) loans to financial institutions by 5 basis points to 3.25% from 3.30% previously.

The move could pave the way for a reduction in China's new benchmark Loan Prime Rate (LPR) in a few weeks. It is linked to the MLF rate and is published on the 20th of every month.

The PBOC said it had lent 400 billion yuan ($56.92 billion) to financial institutions through the liquidity tool, slightly less than a batch of MLF loans worth 403.5 billion yuan due to mature on Tuesday.