PBOC to launch overnight reverse repos from 21 Oct to 2 Nov
China's central bank will conduct overnight reverse repurchase operations from 21 October to 2 November, with daily volume capped at 1 trillion yuan. Governor Pan Gongsheng said the policy framework will shift to focus more on interest rate adjustments.
The People's Bank of China (PBOC) announced on Monday that it will carry out overnight reverse repurchase operations from 21 October to 2 November, with a daily maximum of 1 trillion yuan (US$140 billion), in a move to better match short-term liquidity needs in the banking system.
PBOC Governor Pan Gongsheng said on Monday that the future monetary policy framework will place greater emphasis on the role of interest rate adjustments. To further enhance the precision of interest rate control, the PBOC will study switching the maturity of its main open market operations from the current seven-day to overnight at an appropriate time, making the overnight reverse repo rate the primary policy rate.
Market participants said the PBOC has been working to reduce short-end funding rate volatility and strengthen interest rate regulation in recent years. The elevation of the overnight repo to a primary role will help improve the accuracy of interest rate adjustments, bringing the policy rate closer to actual market transaction rates.