Zhongxin Jingwei, January 24 th, RRR cut+targeted interest rate cut is coming!
On the 24th, the State Council Office held a press conference on the implementation of the deployment of the Central Economic Work Conference and the high-quality development of the financial services real economy. Pan Gongsheng, governor of the central bank, said at the press conference that the deposit reserve ratio will be lowered by 0.5 percentage points on February 5 to provide the market with long-term liquidity of 1 trillion yuan; On January 25th, the interest rate of refinancing and rediscount for supporting agriculture began to be lowered by 0.25 percentage point, and at the same time, the comprehensive financing cost of society will continue to be steadily reduced.
Provide long-term liquidity of 1 trillion yuan.
Pan Gongsheng pointed out that at present, there is still enough room for China’s monetary policy. Relevant departments will balance the relationship between short-term and long-term, steady growth and risk prevention, internal balance and external balance, strengthen countercyclical and inter-cyclical adjustment, and create a good monetary and financial environment for economic operation. At present, the average level of China’s statutory deposit reserve ratio is 7.4%, which is still relatively large compared with the central banks of major economies in the world. This is an effective tool to supplement the long-term liquidity of the banking system.The deposit reserve ratio was officially implemented on February 5, with a reduction of 0.5 percentage points, which will provide the market with long-term liquidity of about 1 trillion yuan.
Pan Gongsheng said that in terms of interest rates, the operation of monetary policy insists on focusing on me. There is still a distance between the current price level and the expected price target. In November and December, 2023, major domestic banks lowered the deposit interest rate. Starting from January 25th, the interest rate for small loans and rediscounts provided to financial institutions will be lowered from 2% to 1.75%.All these measures will help to promote the loan market quotation rate, which is the downward trend of LPR."The market generally expects that the shift of the Fed’s monetary policy will objectively help China expand the operating space of monetary policy." Pan Gongsheng said.
Source: Central Bank website
Later that day, the central bank issued relevant announcements and said that it would fully implement the spirit of the Central Economic Work Conference and the Central Financial Work Conference, and conscientiously implement the decision-making arrangements of the CPC Central Committee and the State Council.Implement a prudent monetary policy flexibly, moderately, accurately and effectively, and intensify macro-control.Strengthen counter-cyclical and cross-cyclical adjustment,Maintain a reasonable and sufficient liquidity, promote the matching of social financing scale and money supply with the expected targets of economic growth and price level, maintain the basic stability of RMB exchange rate at a reasonable and balanced level, and continue to promote the effective improvement of quality and reasonable growth of the economy.
"timely rain",Boost market confidence
When it comes to RRR cuts,Yang Delong, chief economist of Qianhai Open Source Fund.Call it "timely rain", which is the central bank’s policy to support the development of the capital market and will help boost market confidence.
existMingming, chief economist of CITIC SecuritiesIt seems that in terms of operation mode,It is relatively rare for central bank leaders to directly announce the RRR cut at a press conference.In the past, it was customary to mention the use of deposit reserve tools in media interviews; On the other hand, in the four rounds of operations since April 2022, the central bank’s single RRR cut has narrowed to 25bps, and this RRR cut has expanded to 50bps.
"Overall,The timing and scale of this RRR cut have greatly exceeded market expectations.It shows that the central bank clearly supports the goal of repairing the real economy. In January, there was a big liquidity gap in the environment of seasonal increase in cash demand. Near the end of the month, the capital interest rate center rose. It is expected that the liquidity environment will be further improved after the RRR cut. "Yao said.
Obviously, it is emphasized that the RRR cut and the refinancing rate cut were announced at the same time. Although there was an operation mode of RRR cut+targeted cuts to required reserve ratios in history,However, the mode of "RRR cut+targeted interest rate cut" is rare, indicating the precise and effective tone of the central bank’s monetary policy;This RRR cut may or may not be the last aggregate operation in this round of wide currency cycle.
Chang Yang, Chief Analyst of Policy Group of Zhongtai Securities Research InstitutePointed out to Zhongxin Jingwei that at the aggregate level,Releasing long-term liquidity is conducive to preventing capital shortage at the beginning of the year and creating a better monetary environment.From the historical data, January was a relatively high level of new RMB loans, for example, it reached 4.9 trillion yuan in January 2023, which was obviously higher than other months of the year. Lowering the deposit reserve ratio in advance to release the corresponding liquidity is conducive to avoiding the shortage of funds, achieving a red start for the economy at the beginning of the year and creating a more favorable monetary environment.
At the structural level, this move further strengthened inclusive finance. Chang Yang pointed out that while reducing the deposit reserve ratio and realizing abundant liquidity, it also further lowered the price of funds. Starting from January 25th, it lowered the interest rate of small loans and rediscounts for supporting agriculture by 0.25 percentage points, which is conducive to further reducing the financing cost. At the same time, the press conference of the State Council Office also mentioned relaxing the recognition standard of inclusive micro-credit from the current single-family credit of no more than 10 million yuan to no more than 20 million yuan, which fully reflected the five major directions put forward by the Central Financial Work Conference. "Further easing of monetary policy and focusing on both aggregate and structure will help create a good monetary environment for the short-term repair of economic fundamentals." Chang Yang said.
Wang Qing team, chief macro analyst of Oriental JinchengIt is pointed out that this RRR cut is in line with market expectations, and the rate of RRR cut has increased, which has released the signal that monetary policy will increase its strength and steady growth, which will help boost market confidence and consolidate the good momentum of economic recovery.
With regard to the announcement by the central bank that it will reduce the interest rate of re-lending and re-discounting small loans to support agriculture by 0.25 percentage point on January 25th, the Wang Qing team said that this shows that in addition to launching the aggregate monetary policy tool, the structural monetary policy is also focusing on the weak links of the national economy, and the tax reduction and fee reduction policy for small and micro enterprises in the later fiscal policy will also be launched in due course.
Team Wang Qing also said that it is also urgent to reduce the real interest rate by lowering the policy interest rate and guiding the nominal loan interest rate downward. Considering the economic and price trends in the first quarter,In the short term, MLF interest rate may be lowered, and the expected rate of interest rate reduction is 0.1 to 0.2 percentage points."This will lead to the simultaneous downward adjustment of LPR quotations for one year and more than five years, and promote the steady decline of social comprehensive financing costs, thus effectively stimulating consumption and investment demand. Moreover, the downward adjustment of LPR quotation will bring pressure on banks to narrow the net interest margin, and the next step will continue to be solved by lowering the deposit interest rate. " (Zhongxin Jingwei APP)
(The opinions in this article are for reference only, and do not constitute investment advice. Investment is risky, so you should be cautious when entering the market. )
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