June 14, 2018 / 2:04 AM / 5 months ago

China's central bank unexpectedly leaves rates unchanged for reverse repos

SHANGHAI (Reuters) - China’s central bank left borrowing costs for interbank loans unchanged on Thursday, an unexpected decision that shrugged off the U.S. Federal Reserve’s increase in its benchmark rate overnight.

The rate for seven-day reverse repurchase agreements remained at 2.55 percent, the 14-day tenor at 2.70 percent and the 28-day tenor at 2.85 percent, the People’s Bank of China (PBOC) said in a statement on its website.

Reverse repos are one of its most commonly used tools to control liquidity in the financial system.

The PBOC did not change its benchmark one-year lending and deposit rates, which have been kept steady since October 2015.

Analysts had expected the PBOC to follow the Fed to increase interest rates - as it has tended to do - to keep the spread between Chinese and U.S. yields stable, reducing the risks of potential capital outflows that could pressure the yuan currency.

The Fed on Wednesday raised U.S. interest rates by a quarter of a percentage point for the second time this year, and is expected to hike twice more in 2018.

The PBOC injected a net 70 billion yuan via reverse repos in open market operations on Thursday, according to the statement.

Reporting by Winni Zhou and John Ruwitch; Editing by Shri Navaratnam

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