Some market commentary following the PBOC's decision to raise reverse repo rates by 5 bps earlier today

Here are some reactions to the PBOC's decision that was announced here:

Standard Chartered (Becky Liu, head of China macro strategy)

  • PBOC is expected to follow the Fed for most hikes this year, and the scale will depend on the tone of the Fed and the dollar index reaction, which is still largely an exchange rate consideration

Westpac (Frances Cheung, head of Asia macro strategy)

  • Action is consistent with prudent monetary policy stance, and there is valid reason to hike given the gap with the market rate
  • The fact that the PBOC did not inject liquidity alongside the increase, as some might have hoped, underlines our view that liquidity is likely to tighten after the annual top legislature's meeting earlier this month

ANZ (Betty Wang, Raymond Yeung, economists)

  • Action confirms that China's rate hike cycle will continue with PBOC Governor Yi Gang in charge
  • Intensive deleveraging efforts and a potential uptrend in consumer inflation will probably keep a tightening bias
  • PBOC intends to gradually increase policy rates to ensure stability in the U.S.-China yield spread, preventing capital outflows and FX instability