Central Bank of China carries out liquidity operation in reverse repos on Wednesday
Date
12/18/2024 3:36:21 AM
(MENAFN) China's central bank carried out a significant liquidity operation on Wednesday, conducting 387.6 billion yuan (around 53.92 billion U.S. dollars) in seven-day reverse repos at an interest rate of 1.5 percent. This move is aimed at ensuring that the banking system has sufficient liquidity to meet its needs while maintaining a reasonable balance in financial conditions. Such operations are part of the central bank's broader strategy to manage liquidity levels and support economic stability.
A reverse repo is a monetary policy tool in which the central bank purchases securities from commercial banks, with an agreement to sell them back at a future date. This operation effectively injects short-term liquidity into the financial system, helping commercial banks maintain their cash reserves. By offering reverse repos, the central bank can influence short-term interest rates and manage liquidity pressures in the market.
This liquidity support is critical, especially during times when market conditions may face volatility or seasonal liquidity shortfalls. Through reverse repos, the central bank helps to smooth fluctuations in liquidity and ensures that the financial system remains stable, facilitating normal lending and borrowing activities in the economy.
By conducting these operations, China's central bank aims to bolster the confidence of financial institutions and ensure that the broader economy remains well-supported. These measures are important for maintaining the stability of the banking system, promoting economic growth, and addressing any short-term liquidity concerns that may arise.
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