China's Central Bank Raises Some Key Short-Term Interest Rates

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03/16/2017 | 03:59 am


By Shen Hong



SHANGHAI--China's central bank raised a suite of key short-term interest rates for the second time since late January, attributing the moves to shifting market expectations due to a recovering domestic economy and monetary tightening in the U.S.



The People's Bank of China raised the interest rates it charges commercial banks in the money market on the seven-day, 14-day and 28-day loans--also known as reverse repurchase agreements or repos--each by 0.1 percentage point.



As a result, the central bank pushed the benchmark seven-day repo rate to 2.45% from 2.35%. That followed an identical move on Feb. 3, after the PBOC had kept the borrowing cost unchanged since October 2015.



Simultaneously, the PBOC also raised the interest rate by 0.1 percentage point on a form of special loans to 22 financial institutions known as a medium-term lending facility, for the second time since Jan. 24.



In a statement explaining the moves, the PBOC said the rate increases reflect strengthening market expectations for higher funding costs in light of rising domestic inflation and property prices, in addition to the Federal Reserve's recent rate increases.



The PBOC stressed, however, that the rate increases don't equal a formal interest-rate increase, which in China is defined only as raising the official deposit and lending rates.



Write to Shen Hong at [email protected]





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