As expected, the People's Bank of China (PBoC) raised the 7D reverse repo open market rate today by 5 basis points from 2.50% to 2.55%. We wrote on 21st March that this is our view. This shows that there is policy continuity in the central bank in terms of interest rate policy. The objective of raising 5 basis points is to stabilise China-US short term interest rate as raising 25 basis points would be overdone as the central bank has tightened liquidity through daily open market operations. Short-term rates have already gone up. That explains why PBoC raised rate by 5 basis points. However, we expect more than that. ... (full story)