PBOC again floods banking system with cash

This time to the tune of US$2.1 billion.

The People's Bank of China, the central bank, pumped the liquidity into markets via open market operations. It also raised the rate for its seven-day bond reverse repurchase agreements to 4.1%, up from 3.9% in August. The moves indicate PBOC moving to tackle monetary conditions amid data showing increased capital inflows and rising inflation. The central bank has used OMOs as the main tools to adjust money supply in the interbank market since July 2012. It had refrained from injecting liquidity into the banking system since October 15, driving the benchmark seven-day repurchase rate up to a four month high of 4.88% last week. Yesterday’s OMO allayed fears that China would tighten monetary policy to stem inflation after excess liquidity ignited inflation and higher house prices in September.