PBOC Plans Daily Overnight Repos at 1.25%

China’s central bank will conduct fixed-rate overnight reverse repo operations every business day starting Nov. 2, setting the rate at 1.25% and moving toward using the overnight rate as its main short-term policy benchmark. The change is intended to improve control over short-term funding costs and make monetary-policy transmission clearer. Seven-day reverse repos will shift to a variable-rate, fixed-quantity format and be used mainly around tax-payment periods and month-end, while several other liquidity tools will be priced against the overnight rate with their spreads unchanged. The shift brings China’s operating framework closer to those of major central banks, though the scale of future overnight liquidity injections remains uncertain.