PBOC raises short-term interest rates

World
Europe

China's central bank raised short-term lending rates on Friday, with the aim of meeting the liquidity needs of financial institutions and helping the monetary market run smoothly, according to the statement on the People's Bank of China's (PBOC) website.

The headquarters building of the People's Bank of China in Beijing. /CFP Photo

PBOC hiked its seven-, 14-, and 28-day reverse repurchase agreements (repos) by 10 basis points to 2.35 percent, 2.5 percent and 2.65 percent respectively.

The interest rate of overnight Standing Lending Facility (SLF) loans was also raised by 35 basis points, to 3.1 percent from 2.75 percent. ‍

SLF is a monetary tool put into effect by the PBOC in 2013 to provide loans for banks with different tenors in case they face liquidity shortage and are unable to receive financing from the interbank market.

Zhang Xiaohui, Assistant Governor at the PBOC, said later on Friday that the monetary policy will be kept generally prudent and stable, while avoiding either a rapid slowdown in economic growth or excessive liquidity injections.

Zhang Xiaohui, Assistant Governor at the PBOC. /CFP Photo

She said that the adjustments to the monetary policy tools could keep liquidity in the market within a reasonable range. China will keep the yuan stable and will avoid large volatility in interest rates and foreign exchange rates.

She made the comments in an interview published by China Finance, a PBOC-affiliated magazine, through instant messaging application WeChat.

In late January, the PBOC raised rates on its Medium-term Loan Facility (MLF) for the first time since it introduced the liquidity tool in 2014. It was the first time the central bank raised one of its policy interest rates since July 2011.

(With inputs from Reuters)