Event: on April 15, 2022, the central bank launched the MLF operation of 150 billion yuan, and the MLF maturity of this month was 150 billion yuan; The MLF operating interest rate this month was 2.85%, unchanged from the previous month.
In this regard, Dongfang Jincheng interprets as follows:
I. in April, MLF continued with the same volume, and the standard reduction was superimposed and deployed, indicating that the total amount policy remained positive and released the signal of promoting wide credit, which helped to reduce the comprehensive financing cost of enterprises.
The maturity of MLF in April was 150 billion, and the central bank implemented the operation of 150 billion, which means that this month is a continuation of the same volume, ending the previous three consecutive months of net delivery. According to our analysis, the main reason behind this is the deployment of RRR reduction at the national Standing Committee on April 13, and there is a certain substitution relationship between the two medium and long-term liquidity. However, under the background that the RRR reduction rate will be implemented in the near future, there was no reduction in MLF operation in April, which shows that the current aggregate policy maintains a positive attitude. The main goal is to promote the credit easing process and guide the market liquidity to be in a loose state. The financial data in March showed that the scale of new credit and social finance recovered, but the phenomena such as ticket offset loan and social finance relying on government bond financing were obvious. The market demand for independent financing represented by residents' medium and long-term loans and corporate bond financing was still relatively low, and the growth rate of various loan balances continued to hover at the lowest point in recent 20 years. The total amount policy remains active, which can supplement the medium and long-term liquidity of banks and improve their lending capacity, reflecting the policy requirements of "guiding financial institutions to effectively expand lending". This is similar to the RRR reduction effect deployed at the national standing committee meeting on April 13.
It can be seen that after the overall RRR reduction in December last year and the MLF interest rate reduction in January this year, the market interest rate has experienced a rapid downward process. However, since the middle and late February, the market interest rates such as dr007, the maturity yield of one-year Commercial Bank (AAA) interbank certificates of deposit and the yield of 10-year Treasury bonds have shown a slight upward trend in varying degrees. Recently, regulators have repeatedly stressed the need to alleviate the operating pressure of the economic downturn and high PPI on small and micro enterprises in the middle and lower reaches by "reducing the comprehensive financing cost of enterprises". In addition to the decline of enterprise loan interest rate, it is also a focus of "reducing the comprehensive financing cost of enterprises" to curb the upward trend of market interest rate and control the financing cost of enterprise bonds by deploying reserve requirement reduction and superimposing MLF.
Second, the MLF interest rate remained unchanged in April, and the expectation of interest rate reduction failed again.
In April, the MLF interest rate remained unchanged for the third consecutive month, which means that after the policy interest rate cut in January, the monetary policy continues to be in the observation period in terms of price instruments, and it also means that the market expectation of interest rate cut has failed again after March. For the reasons behind it, we judge that the current downward pressure on the economy is further increasing, and the tax rebates and tax cuts in the fiscal policy and the overall RRR reduction in the monetary policy are gradually increasing. However, the Federal Reserve is about to raise interest rates, and the monetary policy still strives to give consideration to both inside and outside under the tone of "focusing on me", so as to maintain the balance between internal balance and external balance, Whether and to what extent the interest rate cut will aggravate capital outflow and trigger the depreciation of RMB exchange rate is the main weighing factor at present. In addition, the duration and impact of this round of epidemic need to be observed. The urgency of economic downturn may not be enough to urge the regulators to use the "big move" of interest rate reduction twice in four months.
Third, the probability of policy interest rate reduction in the second quarter is still high.
We judge that the substitution effect between RRR reduction and MLF in liquidity investment will last for a period of time, and then MLF is more likely to continue with the same amount. More importantly, although the RRR reduction has been deployed at the national standing committee meeting on April 13, the implementation of RRR reduction does not mean that the possibility of interest rate reduction is closed. We expect that the MLF interest rate may be reduced by 10 basis points in the second quarter. Considering the current internal and external situation and monetary policy space, there is a high probability of "double reduction (Comprehensive reserve requirement reduction + policy interest rate reduction)" in the future. The policy operation since 2019 shows that there is no need for "advance notice" to reduce the MLF interest rate. We judge that the interest rate cut may be implemented after the economic work conference of the Political Bureau of the CPC Central Committee later this month. This is particularly important for reversing the expectations of the real estate market, striving to achieve the recovery of the real estate industry and stabilize the macro-economic market in the middle of the year.
Given that China's inflation situation is generally moderate and controllable at present and for some time to come, strong exports will effectively support the RMB exchange rate. The US Federal Reserve's interest rate hike in May will not have a substantive constraint on the central bank's interest rate cut. In fact, the dislocation of monetary policies between China and the United States occurred in 201415 and 2018. At that time, it did not affect the "self dominated" monetary policy of the central bank.
4. The LPR quotation in April will keep the probability unchanged. There are two ways to reduce the loan interest rate.
Considering that it usually takes two comprehensive RRR reductions to trigger the quotation bank to reduce the LPR quotation (two RRR reductions in July and December 2021, triggering the one-year LPR quotation to be reduced by 5 basis points in December), the immobility of MLF interest rate in April means that the latest LPR quotation of one-year and more than five-year period to be announced on the 20th will remain unchanged. In the short term, there are mainly two ways to guide the decline of loan interest rates for enterprises and residents: first, the financial profit making entity, and the bank transmits the cost reduction effect brought by the RRR reduction to the loan customers; Second, the central bank strengthened the implementation of structural monetary policy tools, provided more low-cost funds to banks through refinancing, and then guided banks to extend credit to key areas such as small and micro enterprises, green development and scientific and technological innovation at low interest rates.
