China’s Central Bank Studies Making Overnight Rate Its Main Policy Rate
The move would replace the seven-day reverse repo benchmark and give the central bank tighter control over short-term liquidity, officials said.
- On Monday, People's Bank of China Governor Pan Gongsheng announced the central bank is considering switching its main policy rate to the overnight reverse repurchase rate to improve monetary policy transmission.
- Overnight transactions account for more than 80% of repo turnover in China's interbank money market, making the overnight rate a more sensitive indicator of liquidity supply and demand than current benchmarks.
- The shift aligns China with global peers like the Federal Reserve, though analyst Wang Qing of Golden Credit Rating International clarified the change does not amount to a rate cut.
- Markets responded as the yuan rose 0.1% to 6.6813 per dollar in the offshore market, while yields on 30-year government bonds fell more than 1 basis point following the announcement.
- The PBOC will also widen access to its Standing Lending Facility and push forward reforms of loan pricing benchmarks to strengthen liquidity support for non-bank financial institutions.
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China's central bank studies making overnight rate its main policy rate ...
China Signals Overnight Rate Set to Become Main Policy Benchmark
China’s central bank signaled its overnight reverse repurchase rate will replace the current seven-day rate as the new policy benchmark, in another step that aligns it closer with global peers and has the potential to push down borrowing costs.
The President of the People's Bank of China (PBoC), Pan Gongsheng, said on Monday, 19, that the institution will study adopting the repurchase rate
The People's Bank of China has signaled it will make the overnight reverse repo rate a new policy indicator, taking a new step toward greater alignment with its global peers.
Financial authorities in China are considering introducing a shorter policy rate. It is more similar to other central banks' policy rates than the current Chinese seven-day rate.
Financial authorities in China are considering introducing a shorter key interest rate. It is more reminiscent of other central banks' key rates than today's Chinese seven-day rate. Meanwhile, a new liquidity support package is being launched to shore up non-banking financial institutions in China in case they suffer as customers start withdrawing money on a broad front, according to Pan Gongsheng, China's central bank governor. The message come…
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