PC: Central Banking

To combat rising demand as the quarter came to a close, China’s central bank reduced the borrowing rate of 14-day reverse repos on Monday and increased cash injections.

The People’s Bank of China (PBOC) announced in a statement that it has injected 2 billion yuan ($286.54 million) through 7-day reverse repos and an additional 10 billion yuan through the 14-day tenor.

According to the announcement, the PBOC stated that the increased daily cash injection—up from the daily 2 billion yuan offerings since July—was necessary to “keep liquidity level stable at end of quarter”.

While reducing the interest rate on the liquidity tool by 10 basis points to 2.15% from 2.25%, the PBOC also started 14-day operations again for the first time since late January.

The cut was a follow-up to the central bank’s decision in August to support the faltering economy and boost credit demand by lowering a number of important interest rates, including the 7-day reverse repo rate.

The PBOC injected a net 12 billion yuan via the short-term liquidity instruments on Monday because no reverse repo was maturing.