(Yicai Global) Nov. 18 -- The country's central bank the People's Bank of China lowered the interest rates for its regular reverse repurchase open market operation by 5 basis points, the first such adjustment of the rate in more than four years and a response to key economic indicators hitting a 20-year low last month.

The bank injected a net CNY180 billion cash (USD25.7 billion) into its monetary system via the 7-day reverse repo. The interest rate was set at 2.50 percent, 5 basis point lower than its previous such operation.

The PBOC has not conducted a reverse repo in the past 15 trading days but did engage in two medium-term lending facility operations in between, pumping in cash specifically for regional commercial banks whose business focus is on small cities and the countryside.

The bank unexpectedly cut the interest rate on one-year MLF facilities by 5 basis points to 3.25 percent on Nov. 5.

The PBOC is determined to maintain a prudent monetary policy stance, but this can be slightly adjusted based on changes in economic growth and price levels to prevent "a divergence of inflation expectations," it said in the quarterly report it issued on Nov. 16.

The policy must be stable, and China will continue as one of the few major economies hewing to a "normal" monetary policy, the report added.

Reverse repo agreements are primary tools financial institutions and banks use to provide temporary lending facilities to fund ongoing operations, where a buyer undertakes to temporarily buy a basket of securities for a fixed period and to sell them back at a slightly higher price.

Editor: Ben Armour