The People’s Bank of China cut a key short-term policy rate for the first time in almost a year as it steps up support for growth while shifting toward a new policy benchmark. 

The seven-day reverse repo rate is lowered by 10 basis points to 1.7%, the PBOC said in a statement Monday. The move aims to optimize the open market operation mechanism and increase financial support for the economy, it said.

The seven-day rate is seen as the future benchmark policy rate as the PBOC in recent weeks signaled a shift toward the short-term rate to guide markets. This will reduce the importance of the existing one-year benchmark, known as the medium-term lending facility rate. 

The PBOC last lowered the seven-day rate in August along with the MLF rate by 10 basis points. Since then, currency depreciation pressure has constrained the central bank’s room to lower interest rates. The move comes ahead of the announcement of banks’ benchmark lending rate, or the loan prime rate, on Monday morning. 

  - Bloomberg