China’s Central Bank Shifts Its Short-Term Policy Anchor to Overnight

The People’s Bank of China (PBOC) made the overnight rate its main short-term policy reference and set a fixed 1.25% rate for daily overnight reverse repos.

The overnight rate now takes the place of the seven-day tenor as the main reference in the PBOC’s short-term framework. The change moves the central bank’s policy anchor to an overnight rate.

The PBOC had previously said it would study shifting the main tenor of its open-market operations from seven days to overnight, without giving an implementation date.

The bank began a scheduled series of overnight reverse-repo operations on Oct. 21. The operations are planned to continue through Nov. 2.