China’s central bank injects cash and cuts 14-day repo rate By Reuters

SHANGHAI (Reuters) – China’s central bank on Monday supplied the banking system with 14-day cash for the first time in months and at a lower interest rate, signaling its intention to ease monetary conditions further.

The People’s Bank of China (PBOC) injected 234.6 billion yuan ($33.29 billion) into the banking system through open market operations, saying it wanted to “maintain quarter-end liquidity at a reasonable level in the banking system.”

The PBOC added 160.1 billion yuan through 7-day reverse repos at 1.70 percent, it said in a statement. It also injected 74.5 billion yuan through 14-day reverse repos at 1.85 percent, compared with 1.95 percent during the previous injection.

Analysts said the financing operation itself was not a major easing of policy. China has routinely used 14-day repos to help the banking system get through long holidays, and last did so before February’s spring break.

Monday’s injection comes ahead of China’s National Day holiday starting Oct. 1, and the rate cut aligns the 14-day repo rate with the shorter 7-day repo rate, which was cut in July.

“I would not consider this rate cut a signal that the PBOC has eased monetary policy further,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.

“However, I expect the PBOC to cut the 7-day repo rate as well as the reserve requirement ratio in the coming months. There will be a press conference tomorrow when the financial regulators will shed light on their policy position.”

The world’s second-largest economy is grappling with deflationary pressures and struggling to boost growth despite a raft of policy measures aimed at boosting domestic spending. Speculation that it will speed up monetary easing rose last week after the US Federal Reserve kicked off its easing cycle with a significant half-percentage-point interest rate cut.

The PBOC last cut benchmark short-term and long-term borrowing rates in July.

Weakened Chinese economic activity prompted global brokerages to cut their 2024 China growth forecasts below the government’s official target of around 5%.

President Xi Jinping called on authorities to make efforts to achieve the country’s annual economic and social development goals, state media reported earlier this month.

(1 USD = 7.0474 renminbi)