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Chinese open market operation rates up after Fed rate hike

Updated: Mar 22,2018 1:24 PM     Xinhua

BEIJING — The interest rates for China’s open market operations rose by 0.05 percent on March 22, following an interest rate hike by the US Federal Reserve on March 21.

The rate for seven-day reverse repos rose from 2.5 percent to 2.55 percent, the People’s Bank of China (PBOC) said on its website.

“The increase reflected market supply and demand changes, and represented the market’s normal response to the US Fed’s rate hike,” a PBOC statement said citing an unnamed official in charge of open market operations.

The official said the rise is conducive to narrowing the gap between open market operations and money market rates, forming reasonable interest rate expectations, curbing irrational financing practice and stabilizing macro leverage ratio.

The US Federal Reserve on March 21 raised the benchmark interest rate by 25 basis points and signaled two more rate hikes in 2018, citing “strengthened” economic outlook in recent months.

“In view of realized and expected labor market conditions and inflation,” the Fed decided to raise the target range for the federal funds rate to 1.5 to 1.75 percent, the central bank said in a statement after concluding a two-day meeting.