The People's Bank of China (PBOC) had cut the interest rate of seven-day reverse repos from 1.8 per cent to 1.7 per cent in July.

A reverse repo is a process in which the central bank purchases securities from commercial banks through bidding, with an agreement to sell them back in the future.

The latest decision is aimed at guiding the loan prime rate (LPR) and deposit rates to move downward and maintaining stability in the net interest margin of commercial banks, PBOC governor Pan Gongsheng told a press conference.

The reduction will lead to declines in various benchmark rates, he said. The interest rate of the medium-term lending facility (MLF) is expected to drop by approximately 0.3 percentage points, and the LPR and deposit rates may drop by 0.2 to 0.25 percentage points, Pan was cited as saying by a state-controlled media outlet.

Yesterday, the central bank supplied 14-day cash to its banking system for the first time in months and at a lower interest rate, signalling its intent to further ease monetary conditions.

It injected 234.6 billion yuan ($33.29 billion) into the banking system through open market operations, saying it wanted to "keep quarter-end liquidity adequate at a reasonable level in the banking system".

It added 160.1 billion yuan via seven-day reverse repos at 1.7 per cent, the bank said in a statement. It also injected 74.5 billion yuan via 14-day reverse repos at 1.85 per cent, compared with 1.95 per cent in the previous injection.

Fibre2Fashion News Desk (DS)