Following moves to raise the cost of reverse-repurchase agreements twice this year, a consensus view of trader and analysts says that China’s central bank will raise open-market operation rates by 10bp in the second quarter of this year, reports Bloomberg.
China has been keen to reduce risk associated with excess leverage in the financial system, without causing a cash crunch.
Shanghai-based economist at Australia & New Zealand Banking Group David Qu notes that “China is far from the end of efforts to squeeze out bubbles in the financial system,” adding that “the PBOC will to some extent follow the Federal Reserve in tightening to keep the rate gap largely steady.”
The Shanghai Stock Exchange overnight repo rate was up to 32%, its highest mark since December, while the Shanghai Composite Index was down 1%.