China's central bank to study switching its main policy rate to overnight repo

Pan Gongsheng, governor of the People's Bank of China, said at the opening of the 2026 Financial Street Forum annual meeting on 19 October that the bank will study switching the tenor of its main open-market operations to overnight at a suitable time. The open-market overnight repo rate would then become the main policy rate. [ 4 , 7 , 11 , 14 ]

Pan said the interbank overnight repo rate, commonly called DR001, is the most benchmark-like rate in an active money market and reflects short-term funding supply and demand, and that it has run more stably in recent years. He said it has in practice become the target rate for monetary policy, but the main operation type and the main policy rate still have a seven-day tenor, so the two do not fully match. He said the switch is meant to make interest-rate control more precise. [ 4 , 7 , 12 , 14 ]

Pan also said the bank will push reform of loan-pricing benchmarks, moving from a relatively single reliance on the loan prime rate (LPR) to more diverse benchmarks. Once these are in place, some financially strong firms could choose the interbank overnight repo rate or the LPR as the benchmark for floating-rate loans after negotiating with financial institutions, while the LPR would continue as the benchmark for loans to small businesses and individuals. He said the bank will issue policy guidance at a suitable time and keep improving the LPR quotation mechanism. China News Service said the change meets market demand for varied loan pricing and helps monetary policy transmission. [ 5 , 7 , 14 ]

On deposit and loan benchmark rates, Pan said they are gradually being replaced by market-based pricing benchmarks as interest-rate liberalisation advances. He said bank loan rates already use several benchmarks, including the LPR and the overnight repo rate, and that since the first quarter of this year the bank has published average deposit rates by tenor as a reference for deposit pricing. The bank will push replacement of the interest-calculation basis in the remaining areas with market-based rate indicators, he said. China News Service said the benchmark rates have not been adjusted since October 2015 and are now used only in a few judicial areas. [ 6 , 7 , 10 , 14 ]

Pan said the bank has done considerable work over the past two-plus years, including confirming the seven-day reverse repo rate as the policy rate, adding an overnight operation type and buying and selling government bonds in the open market. He described the transformation of the monetary policy framework as gradual and continuing. Caixin noted that the speech followed a June announcement on enriching the open-market toolbox and adding overnight reverse repo operations. [ 1 , 2 , 7 , 8 , 12 ]

Jiemian said the LPR's pricing anchor was the seven-day reverse repo rate and will be the overnight reverse repo rate, which it put at 1.25%, 15 basis points below the seven-day rate. It said DR001 and long-bond yields fell around the speech and that whether the change will bring benchmark and deposit and loan rates down is the market's focus. Yicai and 36Kr carried experts who said the move should not be equated with a rate cut; Wang Jian (王剑) of Guosen Securities (国信证券) said the policy rate may move from seven days to overnight, and Guo Lei (郭磊) of GF Securities (广发证券) said the market should avoid treating it as a rate cut. [ 13 , 16 , 17 ]