People's Bank of China enhances liquidity with USD42B reverse repurchase agreement

(MENAFN) On Tuesday, the People's Bank of China (PBOC) initiated a significant liquidity injection into the financial system, conducting 300 billion yuan (approximately USD42.12 billion) of seven-day reverse repurchase agreements. This monetary policy move, executed at an interest rate of 1.8 percent, aims to stabilize liquidity conditions as the first half of the year draws to a close, according to a statement by the central bank.

Reverse repurchase agreements, commonly known as reverse repos, involve the PBOC purchasing securities from commercial banks through a competitive bidding process. This transaction includes an agreement to sell back these securities at a future date, typically within seven days. By engaging in reverse repos, the central bank effectively injects liquidity into the banking system, helping to maintain stable financial conditions and support economic activities.

The PBOC's decision to conduct this operation underscores its proactive approach to managing liquidity levels amidst evolving economic circumstances. By ensuring sufficient liquidity in the financial markets, the central bank aims to mitigate potential liquidity shortages that could impact financial stability at the end of the first half of the year. This measure also reflects the PBOC's commitment to fine-tuning monetary policy to support economic growth while maintaining prudent financial oversight.

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