The People's Bank of China lowered the interest rate on 14-day reverse repos to 2.65% (prior 2.7%) today.
- kept the 7-day rate unchanged at 2.50%
The 7-day rate was lowered in November, the first cut to it in over 4 years. The move in the 14-day is the first reduction in over 3 years and comes after a series of nudges higher in the rate since February 2016.
The rate cut comes in addition to the first injection of funds (200bn injected today) after 20 days of no open market operations from the PBOC.
On Friday coming (20 December) we get the monthly prime rate setting. Says Capital Economics on today's cut and what to watch on Friday:
- "It's a sign that the PBOC remains in easing mode and may be just enough to convince banks to make another 5bp cut this Friday to the Loan Prime Rate (LPR), the benchmark upon which loans are now priced."
