SINGAPORE Feb 3 China's central bank surprised
financial markets on Friday by raising short-term interest rates
on the first day back from a long holiday, in a further sign
that it is slowly moving to a tighter policy bias as the economy
shows signs of steadying.
The People's Bank of China (PBOC) said it raised the
interest rate on open market operation reverse repurchase
agreements (repos) by 10 basis points, effective on Feb. 3.
Two banking sources also told Reuters it had raised the
lending rates on its standing lending facility (SLF) short-term
While the moves were modest, they reinforced views that
Chinese authorities are intent on containing risks to the
financial system this year by forcing highly debt-laden
companies to deleverage and cracking down on the use of
short-term money for speculative activities.
"It appears to be an intent to control a real estate bubble.
It could also be aimed at arresting the yuan's depreciation,
although it is on the reverse repo they touched upon and the
impact remains to be seen," said Naoto Saito, chief economic
researcher at the Daiwa Institute of Research In Tokyo.
"All in all, it comes across as a move to tweak interest
rate levels to accompany a broader monetary policy shift."
In late January, the PBOC raised rates on its medium-term
loan facility (MLF) for the first time since it debuted the
liquidity tool in 2014. It was the first time it has raised one
of its policy interest rates since July 2011.
Analysts expect any further steps to be gradual as
policymakers weigh their impact on economic growth, and believe
the PBOC will be in no hurry to raise the policy lending rate
The seven-day open market operations rate was raised to 2.35
percent from 2.25 percent, the rate for 14-day tenor to 2.50
percent from 2.40 percent, and the rate for 28-day tenor to 2.65
percent compared with the previous 2.55 percent, the PBOC said
in a statement.
Banking sources said the overnight rate for the SLF loan was
raised to 3.1 percent from 2.75 percent, the rate for seven-day
tenor to 3.35 percent from 3.25 percent, and the rate for
one-month to 3.7 percent from 3.6 percent, both sources told
China's economy has seen a broad-based pickup in recent
months, with fourth-quarter GDP beating expectations due largely
to a strong housing market and higher government spending on
(Reporting by Shanghai and Beijing newsrooms; Editing by Kim