BEIJING – The People’s Bank of China (PBOC) announced on Thursday a 0.05 percent increase of interbank market rates to now 2.5 percent, a measure taken hours after the 0.25 percent rise in interest approved by the United States Federal Reserve (Fed).
The increase will be applied to the interest that the PBOC charges banks for seven and 28 days loans through repurchase agreements (also known as repos).
In addition, the central bank also announced a similar rise in the interest rates it charges for medium-term financing to institutions, which will rise from 3.20 to 3.25 per annum.
“The increases reflect market supply and demand and represent a normal market response to the Federal Reserve’s interest rate increase,” the PBOC said in a statement released online.
The measure indicates to the markets that the Chinese central bank is heading towards a more restrictive monetary policy, albeit in a more gentle manner so as not to frighten traders.
Moreover, the Hong Kong Monetary Authority announced Thursday an increase in its interest rates of 25 basis points, to now 1.75 percent, in line with the US Fed increase, in order to maintain the linkage of its currency, the Hong Kong dollar with the US dollar.