“Yang Ma” made a move in the New Year! This time, a bowl of “spicy powder” was served.
According to the news of the people’s Bank of China on the 17th, in order to maintain the reasonable and abundant liquidity of the banking system, the people’s Bank of China carried out RMB 700 billion medium-term lending facility (MLF) operation and RMB 100 billion open market reverse repurchase operation on January 17, 2022. The bid winning interest rate of medium-term lending facility (MLF) operation and open market reverse repurchase operation decreased by 10 basis points to 2.85% and 2.10%
the screenshot is from the official website of the central bank.
It is worth noting that this is the first time that the central bank has reduced the policy interest rate since it lowered the 7-day reverse repo interest rate in March 2020 and the 1-year MLF interest rate in April. It is generally believed in the industry that this is expected to push LPR further downward.
release positive signal
The central economic work conference held in December 2021 pointed out that China’s economy is facing the triple pressure of demand contraction, supply impact and weakening expectation. The economic work in 2022 should “take the lead in stability and strive for progress in stability”.
“This interest rate cut can be regarded as another important tool to support steady growth in the central bank’s monetary policy toolbox.” Wen bin, chief researcher of China China Minsheng Banking Corp.Ltd(600016) , said that under the expectation of “steady growth”, since the fourth quarter of 2021, monetary policy has been vigorously supporting steady growth, and relevant policies have been intensively introduced and implemented.
“The interest rate cut this month reflects the requirements of appropriate forward policy development and the organic combination of cross cyclical and counter cyclical policies.” Wen bin believes that although the market’s voice for reducing the policy interest rate is still high, today’s excess continued MLF and reverse repurchase and interest rate reduction of 10bp is still slightly lower than the supermarket’s expectation.
“On the one hand, because the downward pressure on China’s economy is still large and the policy demand is urgent, the interest rate cut in January at the beginning of the year reflects the requirements for the forward implementation of monetary policy; on the other hand, the 10 bp interest rate cut is not small compared with the first interest rate cut in the early stage of the epidemic, which is the embodiment of increasing counter cyclical regulation.” Wen Bin said.
Wen bin also believed that the interest rate cut made good use of the time window. Globally, the inflation of major economies is high, the expectation of monetary policy tightening is gradually strengthened, and the Fed’s interest rate increase and table contraction are expected to be advanced. According to the current schedule, its QE will exit in March, and the interest rate increase may follow. Therefore, the period before the Fed’s interest rate increase is a good time window, and the constraints of monetary policy are relatively limited.
The real estate market is also a major factor affecting the interest rate cut. On December 15, the house price data of 70 cities in December released by the National Bureau of statistics showed that the price index of second-hand houses in 70 cities decreased by 0.36% month on month, slightly narrowed by 0.01 percentage points compared with the previous month, which is the fourth consecutive month of house price decline.
“This year, we will continue to emphasize the content of maintaining sufficient liquidity in the banking or financial system, which will also have a positive impact on the real estate market.” Yan Yuejin, research director of the think tank center of E-House Research Institute, believes that compared with the past operation, the current similar loose liquidity policy will have a greater impact on the relaxation of housing loans.
or drive the subsequent reduction of LPR
After 21 months, the MLF interest rate has been lowered, and the next trend of LPR interest rate has also attracted attention from all parties.
On December 20, 2021, the people’s Bank of China authorized the national interbank lending center to publish the loan market quotation interest rate (LPR): the one-year LPR was 3.8%, down 5 basis points from the previous period; The LPR over 5 years was 4.65%, which remained unchanged.
“In the past, it was rare to cut interest rates and continue to guide the decline of LPR in the next month after the decline of one-year LPR. Even in the epidemic in 2020, there was at least a one month interval between the two LPR declines.” Wen Bin said.
Even so, many industry experts believe that driven by the interest rate cut, the LPR quotation in the next one-year and five-year periods is expected to decline. Wen bin predicted that on the 20th of this month, the 1-year and 5-year LPR quotation probabilities decreased by 10 BPS simultaneously, promoting the steady decline of financing costs of the real economy.
“Since the LPR quotation is directly linked to the one-year MLF interest rate, and LPR is the pricing benchmark when banks issue loans, it is possible to continue to reduce the LPR interest rate after the MLF reduction, which will help further guide commercial banks to reduce loan interest rates, promote the decline of comprehensive financing costs, help enterprises operate steadily and accelerate recovery, and effectively help stabilize growth.” Liang Si, a researcher at the Bank Of China Limited(601988) Research Institute, said.
“Therefore, it can be considered that the line of bank credit will be further relaxed in the first quarter of this year, which objectively promoted the increase of bank lending scale and the acceleration of pace.” Yan Yuejin also believes that the mortgage interest rate may be further reduced, which will also have a positive impact on home buyers.
