Deutsche Bank analysts point out that this morning in Asia the PBOC has cut the interest rate on its seven-day reverse repurchase agreements to 2.5% from 2.55% for the first time since October 2015.
Key Quotes
“Along with the reduction in interest rates, the PBoC also added CNY 180bn of cash into the financial system via open market operations, helping to alleviate liquidity concerns. Meanwhile, over the weekend the PBOC’s quarterly report warned not only on growth risks but also on rising inflation, highlighting the limited room that monetary policy has to respond.”
“The PBoC also said in the report that it will “increase counter-cyclical adjustment” to ward off downward pressure on the economy while adding that monetary policy will “properly handle the short-term pressure,” making sure not to offer excessive funding, while keeping an eye on the risk of expectations that inflation may spread.”
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