For the second time in a year, the central bank has lowered interest rates

After the State Council Standing Meeting put forward the policy tools of "timely use of general and directional reduction" on 4 September, the Central Bank announced the "general reduction" as expected by the market on 6 September: from 16 September, the deposit reserve ratio of financial institutions was reduced by 0.5 percentage points in an all-round way. This is the second comprehensive reduction since this year. In January this year, the central bank cut its benchmark by 1 percentage point. Not only that, but also the city commercial banks operating in provincial administrative areas have received additional reduction support, which will reduce the reserve ratio by 0.5 percentage points on October 15 and 1 percentage point on November 15, respectively.

According to the calculation of the Central Bank, the total long-term funds released by the above-mentioned general and directional reduction are about 900 billion yuan, of which about 800 billion yuan were released by the comprehensive reduction on September 16, and about 100 billion yuan were released by the directional reduction on October 15 and November 15. Wang Yupeng, chief macro-researcher of Dongxing Securities, told Interface News that there are four logic behind the downgrade: first, the economic cycle has been in a "low position" and "counter-cyclical adjustment" demand has increased; second, the liquidity index is low and the speed of credit expansion needs to be improved urgently; and third, the pressure of capital outflow under the global interest rate reduction cycle. Reduce, China's monetary policy operation space is more relaxed; fourth, fiscal policy "leverage" space is limited, "counter-cyclical adjustment" more dependent on monetary policy.

Professor Su Jian, School of Economics, Peking University, told Interface News that the current economic situation has been difficult to cope with the directional reduction. Recent economic and financial data show that demand for medium and long-term loans is weak, investment is still depressed, consumption lacks long-term growth momentum, and domestic demand prospects are worrying.

The head of the central bank especially emphasized that the reduction was a support to the real economy. On the one hand, the funds released by the reduction effectively increased the sources of funds for financial institutions to support the real economy, and also reduced the cost of bank funds by about 15 billion yuan per year. The real interest rate of loans can be reduced through bank transmission. On the other hand, directional reduction is conducive to promoting urban commercial banks serving the grass-roots level to increase support for small and private enterprises.

"With the consolidation of loan interest rates and the improvement of market-oriented loan pricing, this reduction is expected to be transmitted to the real economy more rapidly and effectively than before." Er Yongjian, Jinyan Research Center of Bank of Communications, said, "Lowering the benchmark will help to push down the interest rate of loans and thus reduce the financing cost of the real economy." Analysts pointed out that although the market still expected further reduction in the future, the space was further narrowed, and this reduction is likely to be the last one in the year. On August 20, Sun Guofeng, Director-General of the Monetary Policy Department of the Central Bank, made it clear that "from the perspective of the statutory reserve ratio, there has been some room for adjustment in the past and in the future, but in general, this space is not as big as you think." Su Jian believed that in addition to a comprehensive reduction in the benchmark, interest rates should also be lowered to further reduce the level of interest rates. At the same time, structural monetary policy tools such as MLF and TMLF will continue to alleviate liquidity stratification and guide capital flows to small and micro enterprises.

"It is expected that MLF (medium-term lending facility) interest rates will be lowered first, and LPR (loan base interest rate) will be adjusted next." Wang Yupeng pointed out that "considering the merger of China's newly launched interest rates, the extent of the MLF interest rate reduction is still uncertain."

The announcement on the reduction of the benchmark once again shows that the central bank is unwilling to trigger the expectation of "flooding". Relevant central bank officials said, "The reduction will hedge against the tax period in mid-September, and the total liquidity of the banking system will remain basically stable. Moreover, the implementation of the targeted reduction in two stages will also be conducive to the safe and orderly release of funds. Therefore, this reduction is not a flood of water, and the orientation of sound monetary policy has not changed.

The central bank announced three lowers in September, October and November at one time, which to some extent avoided the possible misunderstanding of the central bank's policies. At the same time, Wang Yupeng believed that the early announcement would help to improve and guide market expectations, especially to boost entrepreneurs'confidence. In addition, it should be pointed out that the reduction did not involve financial companies, financial leasing companies and auto financing companies. According to the central bank, the statutory reserve ratio of these three types of companies is 6%, which is the lowest among financial institutions and is already at a low level. Since July 15, China's deposit reserve system has established a new framework of "three grades and two advantages". Specifically, there are three benchmarks for the deposit reserve ratio. The first is the deposit reserve ratio of large banks, including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, Construction Bank of China, Bank of Communications of China and China Postal Savings Bank, and the second is the deposit reserve ratio of medium-sized banks. The third is the deposit reserve ratio of small banks. Small banks include rural credit cooperatives, rural cooperative banks, village banks and rural commercial banks serving County areas. Previously, the three benchmarks were 13.5%, 11.5% and 8% respectively, while on September 16, they dropped to 13%, 11% and 7.5% respectively. On the basis of the three benchmarks, there are two other preferences: first, if the first and second tier banks meet the evaluation criteria of inclusive financial orientation reduction policy, they can enjoy a 0.5 or 1.5 percentage point deposit reserve rate preference; second, if the banks serving the county reach a certain proportion of new deposits for the local loan assessment criteria.