The People’s Bank of China (PBOC) raised short-term interest rates on the first day after the Spring Festival holiday, a further sign of policy tightening. Higher interest rates could prod debt-laden firms into de-leveraging, though at the risk of stunting growth.“It appears to be aimed at controlling a real estate bubble. It could also be aimed at arresting the yuan’s depreciation, although it is the reverse repo they adjusted and the impact remains to be seen,” said Naoto Saito, Chief Economic Researcher at the Daiwa Institute of Research in Tokyo. The PBOC raised the interest rate on open market operation reverse repurchase agreements (repos) by 10 basis points. It also raised the lending rates on its standing lending facility (SLF) short-term loans. Assistant Governor Zhang Xiaohui said that monetary policy will be kept generally prudent and stable, while also avoiding either a rapid slowdown in economic growth or excessive liquidity injections. Zhang also said China will keep the yuan basically stable and avoid large volatility in interest rates and foreign exchange rates. Analysts said the tightening of primarily money market rates suggested the bank wanted to retain policy flexibility as it balances the need to keep the economy from slowing again. The central bank raised the seven-day open market operations rate to 2.35% from 2.25%, while also lifting rates for SLF loans. The SLF rate acts as a de facto ceiling for interbank lending, the Shanghai Daily reports.