China Central Bank Lowers Seven-Day Reverse Repo Rate to Support Economy, Reports Reuters

SHANGHAI (Reuters) – On Friday, China’s central bank announced a reduction in the borrowing cost for its seven-day reverse repurchase agreements. This move is part of the largest stimulus effort since the pandemic that Beijing introduced earlier this week to bolster the economy.

The People’s Bank of China (PBOC) stated that the rate would be decreased by 20 basis points to 1.50%, down from 1.70%, effective immediately.

The central bank clarified that this rate reduction aims to "further strengthen counter-cyclical adjustment of monetary policy and support stable economic growth."

Additionally, the PBOC indicated that the borrowing costs for 14-day reverse repos, temporary repos, and other reverse repos would also be adjusted by the same margin.

Frances Cheung, head of FX and rates strategy at OCBC Bank, commented that the 20-basis-point cut in the seven-day open market operation reverse repo rate, along with the 50 basis point decrease in the reserve requirement ratio (RRR) announced on Friday morning, reflects the implementation of previously announced policies.

Cheung noted that the market is likely to seek further support on the fiscal side to sustain the recovery in risk sentiment.

It is worth mentioning that the PBOC last adjusted the borrowing cost of this short-term liquidity tool by 10 basis points in July.