China's central bank is considering making the overnight reverse repurchase rate its main policy rate, replacing the seven-day rate. Governor Pan Gongsheng said the change would make control of short-term interest rates more precise. The PBOC also plans to widen access to its Standing Lending Facility.
China's central bank is considering a switch of its main policy rate to the overnight reverse repurchase rate, state media reported on Monday. The move aims to improve how monetary policy reaches the economy.
Overnight rate would replace the seven-day benchmark
The overnight repo rate would replace the seven-day reverse repo rate, which has served as the main policy benchmark since 2024. People's Bank of China Governor Pan Gongsheng said the change is part of efforts to refine the bank's control of short-term interest rates, according to central bank-run Financial News.
Pan was quoted at a key financial forum in Beijing. According to Financial News, he said "the interbank overnight repo rate has effectively become the target rate" for the PBOC.
Closer to global peers
The shift gives the PBOC greater control over liquidity conditions and brings its policy framework more in line with global peers. Central banks such as the US Federal Reserve already use overnight rates as their main policy rates to better anchor the yield curve.
China's 30-year government bond yield fell more than 1 basis point after the announcement.
Pan said the PBOC will also widen the range of institutions eligible to use its Standing Lending Facility. It will set up a liquidity support tool for non-bank financial institutions, including insurers and fund managers.
Source: Investing.com
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