China Reduced The Borrowing Costs
China Reduced The Borrowing Costs. The Central Bank of China (PBOC) cut interest on short-term loans to banks and gave the financial system $ 29 billion.
PBOC lowered its 14-day reverse repo rate by 5 basis points to 2.65 percent on Wednesday, providing the banking system with 150 billion yuan. This vehicle has been used for the first time since 27 September. In addition, the bank provided 50 billion yuan from 2.5 percent (unchanged) with a 7-day reverse repo.
For the first time since November 2016, PBOC cut interest rates on medium-term loans. On November 18, it reduced the 7-day repo rate.
According to Guotai Junan Securities Co., which underlines factors such as pre-holiday cash demand and the fact that banks receive newly issued local government bonds, the markets are preparing for a liquidity shortage of 2.8 trillion yuan in January before the New Year. However, no analyst expects a large net liquidity injection because Beijing does not want the risk of inflation rising while the CPI is at its seven-year high.
Oversea-Chinese Banking Corp. economist Tommy Xie said: “PBOC used mainly 14 diaries to meet seasonal demand. The Bank will remain flexible to keep year-end volatility under control. Still January is probably more important. Because the liquidity gap seems to be larger because of bond supply concerns. ”