PBOC narrows rate corridor, points China toward overnight benchmark
Why it matters: Tighter control of overnight funding costs could sharpen how China transmits monetary policy through banks and markets.
China’s central bank moved closer to using an overnight rate as its main policy benchmark, a shift that would align it more closely with peers such as the Federal Reserve. Speaking at the Lujiazui Forum in Shanghai on Wednesday, People’s Bank of China Governor Pan Gongsheng said the bank will improve short-term rate adjustments and expand overnight reverse repo operations at an appropriate time. Pan also set temporary overnight reverse repo and repo rates at 25 basis points above and below the seven-day reverse repo rate, narrowing the interest-rate corridor to 50 basis points from 70. The change would give the PBOC more precise influence over short-term funding costs in China’s interbank market.