China central bank cuts seven-day reverse repo rate to aid economy

SHANGHAI (Reuters) -China’s central bank said on Friday it was lowering the borrowing cost of its seven-day reverse repurchase agreements, as part of the biggest stimulus package since the pandemic unveiled by Beijing this week to support the economy.

The People’s Bank of China said the rate would be lowered by 20 basis points to 1.50% from 1.70% earlier, according to an online statement, taking effect from Friday.

The rate cut decision aims to “further strengthen counter-cyclical adjustment of monetary policy and support stable growth of the economy”, the PBOC said.

Borrowing costs of 14-day reverse repos, temporary repos and reverse repos would be adjusted by the same margin, it added.

“Today’s 20-basis-point cut in 7-day open market operation reverse repo rate and the 50bp cut in reserve requirement ratio (RRR) represent implementation of the policies announced earlier,” said Frances Cheung, head of FX and rates strategy at OCBC Bank, referring to the RRR cut the PBOC announced on Friday morning.

“Market would likely look for more support on the fiscal side, which is likely required to sustain the recovery in risk sentiment,” Cheung added.

The PBOC last lowered the borrowing cost of the short-term liquidity tool by 10 basis points in July.