China lifts short-term rates to steady Yuan

China lifts short-term rates to steady Yuan

On Thursday, China's major bank lifted short-term interest rates in what economists told was a bid to stave off capital outflows and also keep the national currency steady after the Fed increased US rates overnight.

The leap in rates turned to be China's third in as many months, and it arose a day after the end of the annual session of parliament where leaders stressed that tackling risks from a rapid build-up in debt would be a number one policy priority this year.

Hours earlier, the Fed dared to increase its benchmark policy rate, as had been broadly expected, and indicated that more lifts were on the way as the American economy picks up steam.

The People's Bank of China has left its benchmark lending rate intact since an October 2015 drop, and Thursday's action shouldn’t be considered to be full-blown policy tightening, like that of the major US bank.

However, analysts and traders are assured that the PBOC is increasingly utilizing money market rates as well as other policy tools because it struggles to contain financial risks from years of debt-fueled stimulus and increase the costs for traders betting against the Yuan.

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