July 25, 2021

China unexpectedly cuts reverse repo rates to help economy as novel coronavirus spreads

1 min read

SHANGHAI: China’s central bank unexpectedly lowered the interest rates on reverse repurchase agreements by 10 basis points on Monday (Feb 3), as authorities stepped up measures to relieve pressure on the economy from a rapidly spreading virus outbreak.

The People’s Bank of China (PBOC) said on its website that it was lowering the 7-day reverse repo rate to 2.4 per cent from 2.5 per cent, and cutting the 14-day tenor to 2.55 per cent from 2.65 per cent previously.

READ: China coronavirus cases exceed 17,000 nationwide

The cut came as Chinese financial markets reopened after an extended Chinese New Year holiday, when the death toll from the virus and number of infections had climbed sharply.

On Monday, the PBOC also injected a total of 1.2 trillion yuan (US$173.81 billion) into money markets through reverse bond repurchase agreements. Markets had widely expected the liquidity move but most analysts thought rate cuts might follow later once the economic impact was more clear.

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