The key difference of the monetary policy conducts between the third quarter and the previous two quarters of the year, in our view, is the frequent use of open market operation instruments, in particular, the reverse repo operation to inject the liquidity into the banking system.
The PBoC made an innovative step to conduct a 28-day reverse repo in September, aiming to extend its liquidity management capability along the curve. The specific section of the latest report was given to the introduction to Shanghai Inter-bank Offer Rate (Shibor), the barometer of liquidity in the economy. Given the consistent signals sent by recent releases from Purchasing Managers' Indexes, to real activity data, as well as trade data.
Together with the observations we made from the PBoC's recent operational behavior, as well as the implications we learnt from the statement, we think that PBoC will continue to use the open market operations as its main monetary policy instrument in the coming months.
The article was adapted from a Credit Suisse research report dated November 5. The opinions expressed are his own.
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Landmark building should respect the public's feeling
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