(Oct 30): China’s central bank announced the rate on its overnight reverse repurchase agreements is lower than its current seven-day benchmark, after unveiling plans to adopt it as the main policy lever.

The rate is currently 1.25%, compared with 1.4% on the current seven-day benchmark, according to a statement from the People’s Bank of China (PBOC) on Friday. While the PBOC hasn’t previously made public the rate at which overnight reverse repurchase agreements were conducted, it was set at 1.25% during the first such operation in June, Bloomberg News reported at the time.  

The central bank will start to conduct overnight reverse repo operations every day starting from Nov 2, and reduce the frequency of its seven-day reverse repo transactions, it said. The latter will only be used during stretches such as tax payment times and end of month periods.

Earlier in October, the PBOC gave the clearest signal yet of plans to revamp its toolkit by shifting from the seven-day reverse repo rate to the overnight one. The move would be part of a decades-long effort to reform China’s interest-rate system from a centrally planned framework, and better align the PBOC with other major central banks.

Some analysts expected the switch in the main policy lever to take months, since the PBOC will likely need to gradually increase the frequency of the overnight liquidity operation. 

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