Central banks of many countries start raising interest rates, my country’s monetary policy is based on “steady” and “moving”
Source: Economic Information Daily
On May 4, local time, the U.S. Federal Reserve announced that it would raise the federal funds rate by 50 basis points, and at the same time announced that it would begin shrinking its balance sheet on June 1. In response to high inflation, many central banks have recently started raising interest rates. The Bank of England announced on the 5th that it would raise interest rates by 25 basis points. A number of industry insiders interviewed by the “Economic Information Daily” reporter said that the tightening of the global financial environment will not fundamentally affect the direction of domestic monetary policy. Taking into account internal and external factors, the tone of my country’s prudent monetary policy will continue to strengthen. On the one hand, structural monetary tools will play a greater role, and on the other hand, the space for RRR cuts and interest rate cuts is expected to be opened again.
Central banks raise interest rates to tackle inflation
The U.S. Federal Reserve announced a 50 basis point interest rate hike as scheduled a few days ago, raising the target range for the federal funds rate to between 0.75% and 1%. At the same time, the Federal Reserve announced that it will shrink its balance sheet, which has nearly $9 trillion in size, starting on June 1, in order to match interest rate hikes and curb inflation.
Before and after the Fed pressed the button to raise interest rates again, many central banks around the world also took corresponding measures in terms of monetary policy and coping with high inflation.
The Bank of England, the central bank of England, announced on May 5 that it will raise the benchmark interest rate from 0.75% to 1% to combat inflation. The Bank of New Zealand and the Bank of Canada raised interest rates by 50 basis points respectively; the Reserve Bank of India held a temporary monetary policy meeting from May 2 to 4 and unexpectedly announced that it would raise interest rates by 40 basis points to 4.4% to deal with domestic and foreign inflation risks; May 3 , the RBA raised interest rates for the first time since 2010, which was also the first time in nearly 15 years that it announced a rate hike during the Australian election. At the same time, market expectations that the European Central Bank may raise interest rates this year after the end of bond purchases are also stronger.
Wang Qing, chief macro analyst at Dongfang Jincheng, said that the Fed’s monetary policy trend represents an accelerating tightening of the global financial environment. It usually means that in the next period of time, emerging economies will face greater pressure of capital outflow, currency depreciation, and intensified international market volatility.
It is obvious that the global financial environment is accelerating and tightening, and its spillover impact cannot be underestimated, and it will also bring certain challenges to my country’s monetary policy response.
However, Wang Qing said that the tightening of the global financial environment represented by the Fed’s interest rate hike will not fundamentally affect the direction of domestic monetary policy. He said that the dislocation of monetary policy between China and the United States occurred from 2014 to 2015 and 2018, and at that time, it did not affect the moderate easing orientation of the central bank’s “me-based” monetary policy.
Bank of ChinaLiang Si, a researcher at the research institute, said that recent changes in the external environment have led to certain fluctuations in my country’s financial market, but my country, as an economic power, adheres to the principle of “self-centered” in the operation of monetary policy, focusing on serving the overall situation of domestic economic development. However, it is necessary to pay attention to the risks that may be caused by changes in external monetary conditions, and actively use monetary policy tools to guide market expectations when necessary to ensure the stable operation of my country’s financial market.
“Next, the regulators will pay close attention to the trend of the domestic economy, the foreign exchange market and cross-border capital flows, and decide the timing and intensity of specific measures. But fundamentally, it is not necessary to overestimate the potential impact of the Fed’s accelerated pace of policy tightening on domestic monetary policy. constraints.” Wang Qing said.
my country’s monetary policy volume and structure make two-way efforts to “stabilize growth”
Industry insiders said that while my country’s monetary policy helps stabilize economic growth, it must also take into account the internal and external balance, and effectively deal with the spillover impact of the Fed’s interest rate hike. Taking into account internal and external factors, on the one hand, structural monetary tools will play a greater role, and on the other hand, the room for RRR cuts and interest rate cuts is expected to open up again.
Cheng Shi, chief economist of ICBC International, said that domestic monetary policy will focus more on the use of structural tools at the current stage, especially increasing financial support for industries, enterprises and people affected by the epidemic, including but not limited to increasing transportation. Refinancing quotas for key areas such as logistics, supporting agriculture and small businesses, and manufacturing.
In fact, recently, structural monetary policy tools such as special re-lending have been making frequent efforts recently. The People’s Bank of China has established re-lending for technological innovation to guide financial institutions to increase support for technological innovation; the People’s Bank of China and the National Development and Reform Commission have decided to carry out a pilot program of special re-lending for inclusive elderly care; the People’s Bank of China has also added 100 billion yuan to support the clean and efficient use of coal Special re-loan amount.
While structural monetary policy tools are exerting force, there is still room for interest rate cuts and RRR cuts.
Cheng Shi said that as the pace of interest rate hikes by the Federal Reserve slows down, China’s room for RRR cuts and interest rate cuts is expected to open up again. By reducing financing costs in the financial market, it will promote credit issuance by financial institutions, so as to effectively realize the situation of investment-driven consumption. Wang Qing said that in the second quarter, the MLF (Medium-Term Lending Facility) interest rate may be cut by 10 basis points again, and the deposit reserve ratio may also be cut by 0.5 percentage points. As a result, the intensity of aggregate monetary policy this year will be close to the level in the first half of 2020.
“The prudent monetary policy will continue to exert its strength, and this tone will continue to be strengthened. In particular, it will pay more attention to exerting its strength forward and proactively, taking early action in response to possible problems, and encouraging financial institutions to increase the supply of medium and long-term credit. efforts to better support business operations.” Liang Si said.
Massive information, accurate interpretation, all in Sina Finance APP
Responsible editor: Chen Cheng