The People’s Bank of China (PBoC) this morning chose not to raise its 7-day open market operation (OMO) reverse repo rate and other quasi policy rates, points out the research team at Nomura.
“This belies market expectations (5bp hike) and the practice following the previous two US Fed hikes. We note that these rates, which are charged by the PBoC for lending in the interbank market (especially the most frequently used 7-day repo rate), have increasingly played the role of policy rates in China. Faced with a domestic slowdown that has been worse than expected and the potential fallout of a trade war, Beijing has already chosen to soften its stance on deleveraging and has introduced moderate policy easing measures.”
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