Original title: The central bank lowers the MLF and reverse repurchase rates at the same time than expected. Will the LPR be adjusted this week?
Exceeding market expectations, the central bank adjusted short- and medium-term policy rates simultaneously.
On January 17, the People’s Bank of China announced that in order to maintain reasonable and sufficient liquidity in the banking system, it launched a 700 billion yuan medium-term lending facility (MLF) operation and a 100 billion yuan open market reverse repurchase operation on that day. The winning bid rates for medium-term lending facility (MLF) operations and open market reverse repurchase operations both fell by 10 basis points. In addition, in view of the expiration of 500 billion MLF, the central bank exceeded the sequel “Spicy Noodles” in January.
This is the first time that the open market operation 7-day reverse repurchase rate, which is the short-term policy rate of the central bank, was lowered to 2.2% on March 30, 2020, and it was also the MLF operation rate that was lowered to 2.95% in April 2020. Down for the first time, the 1-year MLF rate represents the marginal cost of funding for the banking system to obtain medium-term base money from the central bank.
Last month, the central bank “accidentally” adjusted the loan market quoted rate (LPR) without lowering the MLF interest rate: December 20, 2021 LPR is: 1-year LPR is 3.8%, down 5 basis points, 5 years The LPR above the period was 4.65%, unchanged from the previous month.
ChinaMinsheng BankChief researcher Wen Bin pointed out that although the market’s call for lowering the policy interest rate is still high, today’s excess MLF and reverse repurchase, and a 10BP cut in interest rates still slightly exceeded market expectations. He pointed out that, first of all, the interest rate cut this month is one of a series of measures for monetary policy to support stable growth, and its policy signal and actual impact will be stronger than the drop in the one-year LPR quotation last month.
“Secondly, the interest rate cut this month reflects the requirement for an organic combination of policy efforts to be appropriately advanced, cross-cyclical and counter-cyclical policies. From the past, in the next month after the one-year LPR decline, the interest rate cut will continue to be guided. LPR declines are rare, and even in the midst of the 2020 epidemic, there is at least a one-month interval between two LPR declines. For this rate cut, on the one hand, due to the fact that my country’s economy is still under great downward pressure, policy The demand is more urgent. The interest rate cut in January at the beginning of the year reflects the requirement that the implementation of monetary policy should be ahead of schedule. On the other hand, the 10 BP rate cut this time is the same as the first rate cut in the early stage of the epidemic. The intensity is not small. Increase the manifestation of counter-cyclical adjustment.” Wen Bin said.
Dongfang Jincheng pointed out that after two RRR cuts in July and December 2021, the growth rate of credit balances in December 2021 continued to decline, and has dropped to 11.6%, the lowest since June 2002. The central bank’s two monetary and credit situation analysis symposiums in August and December 2021 both proposed to “enhance the stability of the growth of total credit”. This means that in order to stabilize the downward trend of credit growth, especially to stimulate the demand for loans in the real economy, monetary policy needs to cut interest rates in addition to RRR cuts.
After the central bank’s MLF interest rate and OMO interest rate were lowered, whether the LPR announced on January 20 will continue to be lowered has become the focus of the market.
“The central bank rarely adjusts the MLF interest rate and LPR quotation for two consecutive months. Although the central bank lowered the MLF interest rate this month, if the LPR continues to be lowered on January 20, it may bring too loose signals to the market.” A Shanghai Stock Exchange The bank’s financial market department said.
Wen Bin believes that since the 1-year MLF interest rate has dropped by 10 BP today, it is expected that the 1-year and 5-year LPR quotations on the 20th of this month will likely drop by 10 BP simultaneously, which will help to stabilize the financing cost of the real economy. There is a drop. In the next stage, the policies that have been introduced are expected to continue to play a role. It is expected that the central bank will continue to use reverse repurchase, MLF and other routine operations to maintain a reasonable and sufficient liquidity. At the same time, more structural policies will be used to accurately support important areas of the real economy and Weak links, and respond to various internal and external risks such as the Fed’s monetary policy shift.
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Responsible editor: Li Linlin
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