Description
The 7-day reverse repo rate of the People's Bank of China (PBoC) is one of the short-term benchmark rates used by China's central bank in its open market operations. The 7-day reverse repo is a financial instrument through which the PBoC injects short-term liquidity into the market by purchasing securities from financial institutions and agreeing to sell them back after seven days. Currently, China also uses the 7-day reverse repo rate as a reference to guide the market loan prime rate (LPR).
When the 7-day reverse repo rate is raised, it typically signals that the PBoC is attempting to tighten monetary supply to curb inflationary pressure or prevent the economy from overheating. Conversely, a reduction in this rate indicates the PBoC’s intention to increase market liquidity, encourage borrowing and investment, thereby supporting economic growth.