Standard Chartered analysts Shuang Ding and Hunter Chan report that the People’s Bank of China (PBoC) has shifted its operational focus from the 7-day repo rate (DR007) to the overnight repo rate (DR001), reflecting the growing dominance of overnight repos in China’s interbank market [1]. The 7-day reverse repo rate was established as China’s sole policy rate in mid-2024 [1]. However, since May 2025, following the publication of the Q1 Monetary Policy Implementation Report, the PBoC has used the overnight rate (DR001) to monitor deviations of money market rates from the policy rate [1].
In its Q1-2026 Report, the central bank pledged to keep the overnight money market rate close to the policy rate, signaling a commitment to this new operational focus [1]. Standard Chartered expects short-term money market rates to remain mostly below the 7-day reverse repo policy rate and anticipates a gradual move toward an overnight policy rate framework [1]. This shift is seen as a way for the PBoC to resolve the tenor mismatch between the DR001 and the 7-day policy rate [1].
The move toward using DR001 as the anchor for money market rates suggests a significant change in the PBoC’s monetary policy operations, with potential implications for liquidity management and rate-setting in China’s financial system [1].
CONCLUSION
The PBoC’s shift toward the overnight rate as the primary money market anchor marks a notable evolution in China’s monetary policy framework. Market participants should monitor further developments, as this transition could influence short-term rates and liquidity conditions in the interbank market.