Reposted from: Securities Daily
On June 7, Yi Gang, Governor of the People’s Bank of China, went to Shanghai to investigate financial support for the real economy and the promotion of high-quality development. At the symposium, Yi Gang said, “In the next step, the People’s Bank of China will follow the decisions and deployments of the Party Central Committee and the State Council, continue to implement a sound monetary policy accurately and forcefully, strengthen counter-cyclical adjustments, fully support the real economy, promote full employment, and maintain currency value. stability and financial stability”.
The regular meeting of the Monetary Policy Committee of the People’s Bank of China is usually regarded as the “weather vane” of the next stage of monetary policy, and the regular meeting for the first quarter of 2023 held in April this year also emphasized “doing a good job in cross-cycle adjustment.” From cross-cycle adjustment to counter-cycle adjustment, although there is only one word difference between the two, there are significant differences in connotation.
For this,CITIC SecuritiesChief Economist Mingming said in an interview with a reporter from the Securities Daily that cross-cycle adjustments focus on a longer time dimension, do not overdraw the monetary policy space, and leave room for the future. Therefore, the strength of monetary policy in the cross-cycle adjustment stage is often Relatively moderate, mainly based on the use of structural monetary policy tools. The intensity of counter-cyclical adjustments is often greater. Taking recent years as an example, counter-cyclical monetary policies often adopt more active easing measures such as lowering interest rates, lowering reserve requirements, and increasing refinancing.
Since last year, the expression of counter-cyclical adjustment has only been “absent” at the regular meeting of the Monetary Policy Committee of the People’s Bank of China in the first quarter of 2023 this year. The work conferences all proposed “strengthening inter-cyclical and counter-cyclical adjustments.”
In Mingming’s view, the emphasis on counter-cyclical adjustment has released a more positive monetary policy signal. Since the beginning of this year, the overall performance of the Chinese economy has been better than expected, and the triple pressure has been eased. However, it should also be noted that the current improvement in my country’s economic operation is mainly restorative. After the “pulse” recovery at the beginning of the year, the economy has entered a plateau period. The endogenous driving force is not strong, and the demand is still insufficient. Monetary policy has shifted from inter-cyclical adjustment to counter-cyclical adjustment, reducing financing costs for the real economy and helping to restore and expand demand.
Minsheng BankChief Economist Wen Bin also told the “Securities Daily” reporter that since the first quarter, my country’s triple pressure of demand contraction, supply shock, and weakening expectations has been eased, and the economic operation has achieved a good start. Since April, the growth rate of many economic indicators has slowed down month-on-month, and the economic recovery has been slower than expected.
Judging from the latest inflation data, after excluding food and energy, the core CPI in May was flat month-on-month, down 0.1 percentage points year-on-year to 0.6%, still hovering at a low level, reflecting weak domestic demand.
Combined with the policy tone of strengthening counter-cyclical adjustments, Mingming believes that the probability of interest rate cuts in the next few months is relatively high, and there is a possibility that the MLF (medium-term lending facility) interest rate will be lowered by 5 to 10 basis points on June 15 at the earliest. If the MLF interest rate is lowered, the 7-day reverse repurchase rate and the LPR (loan market quotation rate) with a period of 1 year or more than 5 years will also follow suit. As for the RRR cut, it is more of a liquidity supplement tool at present, and the necessity is relatively limited in the short term. It is expected that there will be room for a RRR cut in the third quarter.
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