PBOC eyes extra tools for cash supply
Source: Bloomberg News |
January 19, 2013, Saturday
|
Print Edition
Print Edition
THE People's Bank of China yesterday said it will start short-term liquidity operations as additional tools to manage cash supply, amid efforts by policymakers to promote liberalization of interest rates.
Repurchase agreements and reverse repurchase contracts with a maturity of less than seven days will be the main tools of the so-called SLOs, the central bank said in a statement.
It named 12 banks, including the Industrial and Commercial Bank of China and the Bank of China, as participants in the SLOs, which will supplement regular open-market operations held on each Tuesday and Thursday.
Standard Chartered said the move marks the PBOC's shift toward using money-market rates as a policy tool.
"The central bank will probably make the seven-day reverse-repo rate the new benchmark rate in a gradual pace," said Li Wei, an economist in Shanghai at Standard Chartered. "That means when the economy gets overheated, the central bank will push up the seven-day reverse-repo rate in auctions to guide the market in the price-setting of money rates."
The shift may help the government to manage the world's second-largest economy, which grew 7.8 percent last year in the slowest pace in 13 years. The PBOC has issued reverse-repurchase agreements twice weekly since June, and used the contracts to ensure funding availability as it refrained from lowering interest rates.
Repurchase agreements and reverse repurchase contracts with a maturity of less than seven days will be the main tools of the so-called SLOs, the central bank said in a statement.
It named 12 banks, including the Industrial and Commercial Bank of China and the Bank of China, as participants in the SLOs, which will supplement regular open-market operations held on each Tuesday and Thursday.
Standard Chartered said the move marks the PBOC's shift toward using money-market rates as a policy tool.
"The central bank will probably make the seven-day reverse-repo rate the new benchmark rate in a gradual pace," said Li Wei, an economist in Shanghai at Standard Chartered. "That means when the economy gets overheated, the central bank will push up the seven-day reverse-repo rate in auctions to guide the market in the price-setting of money rates."
The shift may help the government to manage the world's second-largest economy, which grew 7.8 percent last year in the slowest pace in 13 years. The PBOC has issued reverse-repurchase agreements twice weekly since June, and used the contracts to ensure funding availability as it refrained from lowering interest rates.
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