MNI: People's Bank of China Hikes Reverse Repo Rate by 5bps

     BEIJING (MNI) - PBOC hiked its reverse repo rate by 5 basis points on

Thursday morning following the U.S. Federal Reserve rate hike.

     PBOC announced on its official website on Thursday morning that it raised

the seven-day reverse repo rate by 5bps to 2.55%.

     The small scale of the rate hike is in accordance with market expectations,

and is the normal reaction after the Fed's rate hike, the PBOC director of open

market operations stated in an interview with Financial News, published Thursday

morning on PBOC's official website.

     The rate hike also reflects money supply and demand, as money market rates

have been constantly higher than reverse repo rates, the director said, and a

narrower spread between the two rates will help market participants to form

reasonable expectations on interest rates and to prevent irrational leveraging

behavior to stabilise macro leverage ratio.

     PBOC has kept liquidity conditions in the banking system reasonable and

stable, and neither too tight nor loose, to ensure credit and total social

financing scale grow properly, the director said.

     ***COMMENTS: The relatively small scale of the rate hike, compared with

previous expectations of 10 basis points, and the relatively good liquidity

condition seen since the start of 2017 both indicate that the PBOC has slightly

relaxed its monetary policy stance, though still remaining ultimately neutral.

This will provide a better environment for stricter regulation measures to

proceed without causing any systemic financial risks.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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