Beijing Follows Fed With Rate Hike With Eye On Cashflows 22 March 2018
Faizan Hashmi Published March 22, 2018 | 01:32 PM
China on Thursday raised the amount it charges lenders to borrow cash as it looks to prevent cash outflows after the Federal Reserve's latest interest rate hike.
Beijing, (UrduPoint / Pakistan Point News - 22nd Mar, 2018 ) :China on Thursday raised the amount it charges lenders to borrow cash as it looks to prevent cash outflows after the Federal Reserve's latest interest rate hike.
With the Fed embarking on a period of monetary tightening as the economy continues to strengthen, Beijing has sought to stop a tide of money leaving the country as investors seek out better returns in the United States.
It also comes as Chinese authorities try to address a huge debt pile that many commentators have warned could hit the economic powerhouse and possibly spark another global crisis. The People's Bank of China (PBoC) said on its website the 0.05 percentage point lift in the seven-day reverse repurchase agreement "matches expectations, and is a normal response to the US Federal Reserve's interest rate hike".
It announced similar moves in December and March last year in response to a US increase. "We don't interpret this as a move to tighten monetary conditions," said Julian Evans-Pritchard, China Economist at Capital Economics in a note, adding the central bank sets liquidity from its lending operations and interbank rates.
"There is nothing to prevent the PBoC from stepping up its injections and pushing market rates lower, even as it hikes" the reverse-repo rate, Evans-Pritchard said. Earlier, Hong Kong's de-facto central bank also announced a rate hike, as is customary owing to the city's monetary policy link to the United States' via their Currency peg.
The Hong Kong Monetary Authority lifted its base rate by 25 basis points to 2.0 percent.
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