China's Central Bank Introduces New Liquidity Tool
The People’s Bank of China (PBOC) has unveiled a new monetary tool to ensure liquidity in the banking system. Announced on Monday, the central bank activated its open market outright reverse repo operations facility, which will be utilized monthly for trading with primary dealers.
This move aims to maintain a “reasonable abundance of liquidity” in the financial system and expand the central bank’s monetary policy options. The PBOC's new tool is expected to play a crucial role in balancing liquidity, particularly as the year comes to an end.
According to **Shanghai Securities News**, the reverse repo facility will likely cover three- and six-month tenors, providing a means to adjust liquidity over the next year. The tool is designed for transactions with a tenor of less than one year, aligning with the central bank’s short-term liquidity management goals.
The introduction of this facility comes at a strategic time, as the PBOC aims to counter the impending expiration of medium-term lending facilities by the end of the year. By utilizing this new reverse repo tool, the central bank seeks to stabilize the financial market and ensure adequate liquidity for economic growth.


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