Higher interest for open market no policy change, says China

China's central bank on Thursday said that higher interest rates for open market operations were not an interest rate hike and did not indicate a change in its monetary policy stance.

Hours after the US Federal Reserve's decision to raise interest rates, China's interest rates for medium-term lending facility (MLF) loans and reverse repos, both open market operation tools of the central bank, went up by 10 basis points, Xinhua news agency reported.

Interest rates of the six-month MLF and one-year MLF rose to 3.05 per cent and 3.2 per cent, respectively, while those for the seven-day, 14-day and 28-day reverse repo stood at 2.45 per cent, 2.6 per cent and 2.75 per cent respectively, according to the People's Bank of China.

This is the third time this year that the interest rates of open market operation tools have been raised.

The higher rates are the result of changes in market supply and demand and do not indicate a shift in China's monetary policy stance, the People's Bank of China said in a statement.

China has vowed to pursue a prudent and neutral monetary policy in 2017.

The latest economic data, including industrial output, fixed-asset investment, private sector investment and real estate investment, showed that the Chinese economy was expanding steadily at the beginning of 2017.

The central parity rate of the Chinese yuan, strengthened by a hefty 253 basis points to 6.8862 against the US dollar on Thursday.

--IANS

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