Previously, the five-year LPR interest rate was lowered four times, with a total of 25bp, all of which were synchronous reductions with the reduction of MLF interest rate. The way and range of this reduction are higher than market expectations. Different from the previous way of reducing the reserve requirement first, then compressing and adding points, and unilaterally reducing the one-year LPR interest rate, the central bank chose to keep the one-year LPR interest rate unchanged this time, and unilaterally reduce the five-year LPR interest rate by 15bp. The renewal of the equivalent parity of MLF did not affect the reduction of the five-year LPR interest rate. Reversing expectations, targeted improvement of medium and long-term loans and maintaining stable credit growth mean a lot.
Why choose to reduce the 5-year LPR interest rate at this time? First, the impact of the epidemic in April greatly exceeded market expectations, and the urgency of stabilizing growth has increased significantly. The problem of weakening expectations is prominent, the financing demand of market subjects shrinks seriously, and the willingness of residents and enterprises to increase leverage is low. The policy side urgently needs to make efforts to improve expectations and avoid the formation of extremely pessimistic consensus expectations. Second, China's economic vitality needs to be restored urgently. At present, there is no clue that there will be economic overheating that will lead to the overall rise of prices. Therefore, on the premise of price stability of monetary policy, it should bear the counter cyclical regulation role of "promoting economic growth". Third, the reduction of the long-term capital cost at the bank's liability side also provides a prerequisite for the reduction of the five-year LPR interest rate.
What is the impact of this interest rate cut? This interest rate cut is the biggest signal of stability and improvement. The prerequisite for boosting domestic demand is confidence stabilization. The current five-year LPR interest rate cut is the largest in history, which once again shows the determination of the policy side to maintain economic stability and has strong signal significance. With the improvement of fundamentals such as the epidemic, the medium and long-term loans of enterprises are expected to improve. Based on the recent frequent policy statements on stabilizing the growth of credit scale, we believe that the trend of wide credit will not change during the year, and the market should be in awe of the government's ability margin.
Second, it helps to improve the stability of real estate sales and help stabilize the real estate market.
How to expect the future policy side? Looking back on the previous stable growth in history, after the high-level meeting sends the signal of stable growth, it will generally be accompanied by corresponding policies and measures, but often the monetary policy has obvious display, while the display of other supporting policies is relatively weak. Most of the steady growth policies are opened by monetary policy. The reduction of the five-year LPR interest rate is an obvious signal that steady growth is gaining momentum. The rest of the second quarter and the third quarter will be an important window period for frequent actions on the policy side. Accordingly, the risk of the bond market may rise during this period, and the stock market will also usher in more intensive policy positive catalysis. Monetary policy has fired the first shot at present, and fiscal policy is expected to follow up as soon as possible. First of all, the implementation of tax and fee reduction and enterprise relief policies will be accelerated. Secondly, infrastructure construction is still an important starting point. 102 major projects in the follow-up "14th five year plan" will be started as soon as possible this year, and the investment force will be moderately advanced. In addition, according to the economic data in April, the three pain points of "logistics obstruction, limited service industry and continuous bottoming of real estate investment" in China's macro-economy urgently need to be addressed.
Risk tip: the epidemic situation repeatedly exceeded expectations, the geographical situation exceeded expectations, and the policy end force exceeded expectations.
