PBoC’s hike signals policy management shift

Abstract

The People's Bank of China (PBoC) used to take a 'no-drama' approach when it came to the Chinese New Year, injecting liquidity into the market to cater for the increased demand for funds during the long holiday season. Financial markets were therefore largely caught off-guard this year. In late January, just before the Chinese New Year holiday, the PBoC raised rates on its medium-term loan facility (MLF) by 10 basis points (with the one-year rate standing at 3.1%).