Original title: A comprehensive RRR cut officially landed on the MLF rate unchanged, releasing a signal of a prudent monetary policy
On July 15, the overall RRR cut came as scheduled. The People’s Bank of China announced that it would lower the deposit reserve ratio of financial institutions by 0.5 percentage points (excluding financial institutions that have implemented a deposit reserve ratio of 5%) and release about 1% of long-term funds. Trillion yuan.
In addition to hedging the maturity of the 400 billion medium-term lending facility (MLF), the announcement stated that considering the current tax peak and other factors, financial institutions still have a certain demand for medium and long-term funds, in order to maintain reasonable and sufficient liquidity in the banking system , The People’s Bank of China carried out 100 billion yuan MLF operations and 10 billion yuan reverse repurchase operations.
Many market participants have noticed that both the MLF and open market reverse repurchase rates launched yesterday remain unchanged.Everbright SecuritiesZhang Xu, chief analyst of fixed income analysis, believes that the MLF operating interest rate remains unchanged, which fully shows that the RRR cut is a routine liquidity operation after the monetary policy returns to normal, and the orientation of the prudent monetary policy has not changed.
Long-term “replenishment” reduces the cost of institutional debt
Improving banks’ debt-side conditions and playing a good role in supporting the real economy has advantages in terms of cost and maturity compared to MLF, releasing long-term low-cost funds through RRR cuts.
Speaking of the method of replacing the MLF with the RRR cut, Wang Qing, chief macro analyst at Oriental Jincheng, believes that since the funds released after the RRR cut have no time limit, the replacement MLF has a one-year term, which is both a combination of two liquidity tools. Substitution also means “changing the long for the short”, which will help reduce the banks’ long-term liquidity constraints and enhance the banks’ ability to provide credit.
While using RRR cut funds to hedge against maturity, the People’s Bank of China also used the new MLF and reverse repurchase to better realize market communication and expected guidance, releasing policy interest rate signals.
The new MLF of 100 billion yuan is also in line with the operating practices of the People’s Bank of China. The People’s Bank of China stated in its Monetary Policy Implementation Report for the first quarter that at present, the People’s Bank of China has gradually formed the practice of conducting MLF operations at a fixed time in the middle of each month and continuous open market operations on a daily basis, continuously releasing policy interest rate signals, and guiding Market interest rates fluctuate around policy interest rates.
MLF interest rate unchanged releases a robust signal
Under the premise of the “stable” monetary policy, the current MLF interest rate remains unchanged in line with market expectations. Zhang Xu believes that when market entities observe the monetary policy orientation, they only need to see whether the policy interest rate changes. The MLF interest rate remained at 2.95%, fully demonstrating that the orientation of prudent monetary policy has not changed.
“At present, my country’s economy is stable and improving, and the orientation of the prudent monetary policy has not changed.” Sun Guofeng, Director of the Monetary Policy Department of the People’s Bank of China, said earlier that since 2021, the prudent monetary policy has been flexible, precise, reasonable and appropriate, and stable. Economic support has achieved positive results.
Judging from the performance of interest rates after the implementation of the RRR cut, the operation is in line with market expectations, and funding remains stable. Yesterday,Shanghai BankThe inter-bank offered rate (Shibor) rose by 11.4 basis points overnight, and the 7-day Shibor was reported at 2.178%, staying within a reasonable range.
Although MLF operating interest rates remain unchanged, many market analysts believe that there is still the possibility of a downturn in LPR this month.CITIC SecuritiesThe deputy director of the Institute clearly believes that the RRR cut and the lower benchmark deposit interest rate will reduce the capital cost of commercial banks, which is expected to drive the LPR quotation down. The decline in LPR is the most direct and effective way to push real loan interest rates down further.
“After the RRR cut decision was issued, the mid-market interest rates, including the March Shibor and interbank certificate of deposit interest rates, have fallen sharply, and the marginal cost of funds for banks has fallen. We believe that the one-year announcement on the 20th of this month will not be ruled out. The possibility of a slight downward adjustment of 5 basis points in the future LPR quotation.” Wang Qing said.
Monetary and credit policies are more directional support
Under the premise of a moderate total amount, the monetary and credit policy puts more emphasis on structural support. Therefore, the comprehensive RRR cut will also focus more on redirecting support, focusing more on supporting small, medium and micro enterprises and labor-intensive industries.
“According to the current bank’s credit system and regulatory policies, the incremental credit provision brought about by the overall RRR cut is actually targeted.” Lian Ping, chief economist of Zhixin Investment, believes that because commercial banks operate in strict accordance with national credit policies , The funds released after the RRR cut will mainly flow into major construction projects supported by national policies and small and medium-sized enterprises with priority support.
According to Yi Gang, Governor of the People’s Bank of China, the monetary and credit policy will mainly emphasize two structural aspects under the premise of maintaining a moderate aggregate policy. Among them is the insistence on developing inclusive finance.
Wang Qing believes that subsequent regulatory authorities may rely more on structural policy tools, such as strengthening tax cuts and fee reductions for small and micro enterprises, and moderately expanding inclusiveness, low capital interest rates, and investment in precise refinancing scales, etc. Targeted drip irrigation in the fields of small and micro enterprises and green finance adheres to the tone of a sound and neutral monetary policy.
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