BEIJING, Aug. 12 (Xinhua) -- The People's Bank of China (PBOC) announced Wednesday that it will conduct overnight reverse repo operations on Aug. 14 and from Aug. 17 to Aug. 19, to better meet the short-term liquidity needs of the banking system.
The operations will be conducted at a fixed interest rate through quantity-based bidding, with the daily amount capped at 600 billion yuan (about 88.4 billion U.S. dollars), according to the PBOC.
Overnight reverse repo is a process in which the central bank purchases securities from commercial banks through a bidding process, with an agreement to sell them back the next day.
In late June, the PBOC added the tool to its open market operations, a move aimed at further improving the interest rate regulation mechanism and diversifying its monetary policy toolkit.
The new tool can help smooth temporary fluctuations in liquidity, improve the efficiency of liquidity management and reduce financing costs for institutions, according to the central bank. ■
