BOFIT Viikkokatsaus / BOFIT Weekly 2017/12

In response to the US Federal Reserve's 25-basis-point rate hike on March 16, the People's Bank of China responded immediately by hiking rates used in its open market operations and lending programmes. The increases were small. For example, the 7-day reverse repo rate increased from 2.35 % to 2.45 %. Also most of the lending rates for liquidity programmes (SLF and MLF) were lifted by 10 basis points. While the rate hikes indicate a slight tightening of the monetary stance, they suggest the PBoC is better prepared than earlier to react to changes in the financial markets. Rates were also raised in February.

The impact of rate hikes on the economy, especially regarding debt growth, is expected to be marginal. On money markets, rates were up slightly. Today (Mar. 24), the 7-day SHIBOR stood at 2.8 %.