Main points
The economy was affected by the current epidemic or exceeded expectations
From the perspective of the proportion of economic scale, the impact of the epidemic is greater than that of Wuhan in 2020. We expect that it will have an impact of - 1.5% ~ - 1.0% on the GDP growth in the current quarter. Therefore, we will lower the expectation of China's economic growth in the first quarter of 2022 from 6.5 to 5.0-5.5. The downward trend of China's economic inflation remains unchanged
We have always believed that the price risk during the economic downturn mainly lies in deflation, so the main direction of inflation management should be "anti deflation". The two "stagflation" in the western economy in the 1970s is a unique historical phenomenon under the background of a special era, and the current conditions for "stagflation" are not available.
RRR reduction will create conditions for interest rate reduction
The RRR reduction is based on the comprehensive RRR reduction and the superposition of preferential measures outside the nuclear power plant. The decline of the deposit reserve ratio of large financial institutions will have a significant impact on the liquidity of the money market when there is a high level of provision and over storage in the financial institutions themselves. The loose liquidity of the money market will reduce the interest rate of the money market, so as to create conditions for reducing the interest rate in the subsequent open market operation.
Interest rate cut after RRR reduction
Under the action of structural monetary policy, the decline of China's interest rate is a directional trend. Although we are faced with the continuation of high commodity prices and the upward trend of overseas inflation in the short term, under the pattern of world economic differentiation, Chinese and foreign macro-control policies will also show a divergent development trend. We originally believed that the "double reduction" may be delayed due to the current price expectation, but under the downward trend of money market interest rate caused by the RRR reduction, the interest rate reduction will also be accelerated, which may occur around the middle of the year.
Risk tips
The conflict between Russia and Ukraine has expanded, China's inflation has risen higher than expected, the international financial situation has changed, and China's monetary policy has changed more than expected.
