China Central Bank lowers reverse repo rate in 5 years maximum

US, WASHINGTON (ORDO NEWS) — On Monday, the Chinese central bank unexpectedly lowered its reverse repo rate by 20 basis points – for almost five years at the most – amid attempts by the authorities to contain pressure on the economy weakened by the coronavirus pandemic.

The People’s Bank of China announced on its website that it had reduced the seven-day reverse repo rate to 2.20% from 2.40%, but did not provide a reason for such a move.

Ma Jun, an adviser to the central bank, told state media that China still has ample opportunity to adjust its monetary policy and that the decision on the rate was made taking into account the resumption of Chinese companies, the global virus situation and the deteriorating foreign economic situation.

Earlier Monday, the central bank poured 50 billion yuan ($ 7 billion) into the money markets through seven-day reverse repo transactions – after 29 trading days without new infusions of fresh funds.

Futures on 10-year government bonds in China at first responded positively to the rate cut, while the most active contract in June increased by 0.23%, but then lost its advantage, falling by 0.1%.

The Politburo of the Central Committee of the Communist Party of China on Friday reported that the government will intensify economic policy measures and tighten control over their implementation in order to achieve annual guidelines for economic and social development.

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