On June 15, the People’s Bank of China launched a 200 billion yuan medium-term lending facility (MLF) operation, and the winning interest rate was 2.85%, maintaining the previous value unchanged. So far, the MLF operating rate has remained unchanged for 5 consecutive months.
At present, external disturbance factors are increasing, the domestic growth stabilization policy is gradually implemented, and the MLF interest rate remains unchanged, which means that the monetary policy is generally in the observation period. Experts said that in the context of the Fed’s rapid tightening of monetary policy, the MLF interest rate will remain unchanged, which is conducive to taking into account the internal and external balance, and the follow-up MLF interest rate reduction space is relatively limited.
Balance internal and external
The MLF interest rate unchanged this time is in line with expectations
Recently, the world‘s major economies have stepped into a tightening cycle one after another, and a new round of interest rate hikes by the Federal Reserve is imminent.
He, an associate professor at Peking University’s Guanghua School of Management, said that considering the internal and external environment, the current global monetary policy is generally in a stage of tightening. pressure.
Wang Qing, chief macro analyst at Dongfang Jincheng, said that at present, various measures to stabilize growth have entered the stage of implementation, and monetary policy is generally in the observation period, so the MLF interest rate will remain unchanged in June; at the same time, under the background of the rapid tightening of monetary policy by the Fed , which also helps in taking into account the internal and external balance.
Looking back, the last time the MLF rate was adjusted was in January this year. At that time, open market operations and MLF interest rates were simultaneously cut by 10 basis points, to 2.1% and 2.85%, respectively.
From a quantitative point of view, experts said that this MLF continuation of the same amount is mainly due to the reasonable and sufficient liquidity in the current market, and there is no need to increase the amount of MLF to “replenish water”. Judging from the recent performance of market benchmark interest rates, the yield of DR007 and 1-year commercial bank (AAA) interbank deposit certificates is significantly lower than the corresponding policy interest rate level, which means that the current market liquidity continues to be slightly higher than reasonably sufficient.
Limited room for MLF interest rate cuts
Monetary policy still highlights “I am the main”
For a period of time, U.S. inflation has continued to be high, and the marketâs expectations for the Fed to accelerate tightening have increased. Affected by this, U.S. bond yields have soared recently, and the Sino-U.S. interest rate gap has widened.
As of press release yesterday, the yield on 10-year U.S. Treasury bonds was 3.49%, and the yield on 10-year Chinese government bonds was 2.85%, with an inversion of more than 60BP. Experts said that under the circumstance that the U.S. tightening expectations are getting stronger and further pushing up U.S. bond interest rates, it cannot be ruled out that the inversion of the Sino-U.S. interest rate gap will continue for a period of time.
How will this affect the space for my country’s monetary policy? “Currently, the United States is focusing on controlling inflation, and my country is focusing on stabilizing growth. The inversion of interest rates between China and the United States more reflects the difference in the economic cycle between the two countries.” The chief economist of CITIC Securities believes that my country’s monetary policy is still “me-based” , the focus is still on the domestic economic fundamentals, and more in the later stage, the LPR can be lowered to stimulate the stable growth of loan demand.
“The Sino-US interest rate spread has inverted in stages, which has limited constraints on my country’s monetary policy.” Color said that although the Sino-US bond yield spread is widening, China is still higher than the United States in terms of real yield. Moreover, my country’s economy is currently in an obvious recovery process. With a view to further releasing credit demand and promoting economic recovery, there is still room for further easing of monetary policy. host”.
Wang Qing believes that in order to promote the decline of mortgage interest rates, in addition to continuing to guide the reduction of LPR quotations for periods of more than 5 years, the possibility of lowering the MLF interest rate in the third quarter cannot be ruled out. However, taking into account both internal and external balance, the room for future MLF interest rate cuts will be limited.
LPR cuts expectations for cooling
Short-term policy is expected to enter the wait-and-see
On the basis that the “anchor” of the MLF interest rate remains unchanged, the market’s expectations for a reduction in the LPR this month have cooled.
Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, believes that since the MLF interest rate will remain unchanged this month, and considering that some banks are facing operating pressure, the LPR quoted interest rate is expected to remain stable this month.
“In June, the quotations for LPRs with a maturity of 1 year and a period of more than 5 years are likely to remain unchanged.” Wang Qing said that in May, the quotation of LPR with a maturity of more than 5 years was reduced by 15 basis points. The policy side will observe the impact of this targeted rate cut. The stimulus effect of the property market, at the same time, also digested the impact of the recent decline in the cost of the bank’s liability side to a certain extent.
Previously, in May, the LPR linked to housing loans with a maturity of more than 5 years was cut by 15BP alone, the largest decline since the LPR reform in August 2019.
Zhou Maohua said that previously, the country had intensively introduced incremental policies and measures, and judging from a series of economic and financial indicators, the domestic property market and economic activities are currently in the recovery stage, and short-term policies are expected to enter a wait-and-see.