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Original title: Institutions expect the RRR cut to land soon, and do not rule out simultaneous interest rate cuts! Will there be a “double down” this month?
April is regarded as an important window period for monetary policy to strengthen. Now, the RRR cut is only to be implemented, and some market institutions further pointed out that it is not ruled out that this month will usher in a “double reduction” move of RRR cut + interest rate cut. However, some institutions believe that the current monetary policy is still facing the challenge of balancing the internal and external balance, and the possibility of interest rate cuts has declined.
Analysts pointed out that the current “me-based” monetary policy has not changed, and whether or not to cut interest rates depends on economic performance. The upcoming first-quarter economic data is quite critical.
Downgrade is coming
There is basically no suspense about the RRR cut in April.
The executive meeting of the State Council held on the 13th decided to use monetary policy tools such as RRR cuts in a timely manner to further increase financial support for the real economy, especially industries severely affected by the epidemic, small, medium and micro enterprises, and individual industrial and commercial households, and make reasonable profits to the real economy. Comprehensive financing costs.
Referring to previous experience, many institutional sources predict that the new RRR cut is likely to be implemented in April, and it may be announced as soon as this week.
Will there be a rate cut?
What the market is concerned about is, in addition to the RRR cut, will there be a rate cut?
On the one hand, historically, “double downs” have occurred, most recently in April 2020.
Specifically, on October 15, 2008, the RRR cut was implemented, and 15 days later, the benchmark interest rate for 1-year loans was lowered; on December 5, 2008, the RRR cut was implemented, and 18 days later, the benchmark interest rate for 1-year loans was lowered; September 2019 The RRR cut will be implemented on March 16, and the 1-year LPR will be lowered four days later. On April 15, 2020, the central bank will cut the RRR and interest rates at the same time. On December 15, 2021, the RRR cut will be implemented, and 5 days later, the interest rate cut will be implemented.
On the other hand, there is a need for the current implementation of “double drop”.
According to industry insiders, there have been some unexpected changes in the international and domestic environment recently, and the downward pressure on the economy has further increased. It is imperative to stabilize the economic fundamentals, and it is even more urgent to strengthen macro policies including monetary policy in a timely manner. In theory, RRR cuts and interest rate cuts are all in the toolbox, and further use is possible.
However, at the same time, under the circumstance that the economic and policy deviation between China and the United States has increased, the Sino-US interest rate gap has inverted, exchange rate fluctuations and cross-border capital flows have increased, and monetary policy is facing the challenge of balancing internal and external balance.
The People’s Bank of China has previously pointed out that under the macroeconomic structure of opening up, the monetary policy remains stable, and it is necessary to maintain a balance between internal and external equilibrium, and coordinate domestic and foreign currency policies. However, it is also clear that when there is a contradiction between the internal equilibrium and the external equilibrium, as a large country economy with domestic demand as the mainstay, it should focus on the internal equilibrium while taking into account the external equilibrium to find the optimal balance point.
Analysts pointed out that the National Standing Committee’s clear deployment of the RRR cut highlights the main line of policy for stabilizing growth, and it is also a manifestation of the adherence to “me-based” monetary policy. This helps to dispel concerns about the orientation of monetary policy, but it does not mean that changes in overseas situations will not have any impact on my country’s monetary policy regulation. After all, the problem of balance exists objectively.
At present, the institutions’ views on further interest rate cuts are divided.
There are many institutions that believe that interest rate cuts may be possible, mainly because of “steady growth”.Such asCITIC SecuritiesThe research report said that the RRR cut may be implemented in the short term, and the possibility of “double reduction” is not ruled out.
Yuekai Securities reported that the current real interest rate gap between China and the United States still has a certain buffer space, and China’s exports and foreign direct investment are still relatively prosperous, which has greatly eased the external pressure on monetary policy. In the short term, my country’s monetary policy will still adhere to the principle of “maintaining me”, to hedge the downward pressure on the economy, and there is still room for RRR cuts and interest rate cuts.
Some institutions also believe that the possibility of interest rate cuts has declined, mainly because of “taking into account the external balance”.Such asGF SecuritiesThe research report said that while the current domestic monetary policy is exerting efforts to stabilize growth, it also needs to take into account the external balance, and the possibility of continuing to lower the MLF and reverse repurchase rates has declined.
A recent research report released by Everbright stated that historically, during the period of increasing internal and external balance pressure, the central bank has basically not used policy interest rate tools, and more used quantitative tools to hedge the downward pressure on the economy.
Taking into account the issues of stabilizing growth and balancing internal and external balance, Caixin Research believes that structural monetary policy may be the dominant force. The reason is that the downward pressure on the domestic economy has further increased, and it is decided that the monetary policy should continue to maintain the general tone of prudence and easing.
The researchers pointed out that the current pattern of “me-dominant” monetary policy has not changed, and whether or not to cut interest rates depends on economic performance.
Some institutions said that considering the pressure on economic growth, it is still possible to cut interest rates logically. After all, historically, whether or not to cut interest rates after the RRR cut mainly depends on how the economic fundamentals are.
Taken together, “interest rate cuts” are still a policy option, and the possibility cannot be ruled out, but the probability is smaller than the RRR cut.
For equity assets,Haitong SecuritiesThe research report pointed out that in the future, domestic asset prices mainly depend on our own policies. “As long as you go the right way, there’s nothing to fear.”
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Responsible editor: Zhao Siyuan