Chinese open market operation rates up after Fed rate hike

The interest rates for China's open market operations rose by 0.05 percent on Thursday, following an interest rate hike by the U.S. Federal Reserve on Wednesday.

The rate for seven-day reverse repos rose from 2.5 percent to 2.55 percent, the People's Bank of China (PBOC) said on its website.

"The increase reflected market supply and demand changes, and represented the market's normal response to the U.S. Fed's rate hike," a PBOC statement said citing an unnamed official in charge of open market operations.

The official said the rise is conducive to narrowing the gap between open market operations and money market rates, forming reasonable interest rate expectations, curbing irrational financing practice and stabilizing macro leverage ratio.The U.S. Federal Reserve on Wednesday raised the benchmark interest rate by 25 basis points and signaled two more rate hikes in 2018, citing "strengthened" economic outlook in recent months.

"In view of realized and expected labor market conditions and inflation," the Fed decided to raise the target range for the federal funds rate to 1.5 to 1.75 percent, the central bank said in a statement after concluding a two-day meeting.  

(File photo)