Central Bank of China decreases REPO rate and increases cash injections

On Monday, China's Central bank decreased the cost of borrowing on 14-day reverse repos, thereby starting to fight growing demand. This allowed increasing cash injections to prevent or reduce demand by the end of the quarter.

The People's Bank of China (PBOC) delivered a statement that the investment is 2 billion yuan ($286.54 million) through a 7-day reverse repo and 10 billion yuan through a 14-day repo.

The PBOC statement claimed that higher daily cash injections since July were needed to maintain a stable level of liquidity at the end of the quarter, compared with daily offerings of 2 billion yuan.

The PBOC interest rate on the liquidity instrument was reduced by 10 basis points to 2.15% from 2.25%. Also, 14-day operations were reactivated by the PBOC for the first time since the end of January.

In August, to support China's declining economy, the Central Bank decided to decrease the 7-day reverse repo rate to revitalize demand for credit and some other key interest rates. Additionally, some other key interest rates have also been decreased.

Short-term liquidity instruments allowed the PBOC to invest 12 billion yuan, as the maturity date of the reverse repo had not yet expired on Monday.