Monetary policy continues to maintain a sound tone
Our reporter Yao Jin
On July 20, the latest LPR market rate (LPR) was released: 1-year LPR was 3.85%, and 5-year or longer LPR was 4.65%, both of which were the same as the previous period.
So far, LPR has remained unchanged for 15 consecutive months.
Previously, the market was quite concerned about the current LPR quotations, and there were also big differences.
There is a view that the current LPR quotation will be lowered because the central bank lowered the RRR to release long-term funds and reduced the cost of bank liabilities. The policy intention is to guide the real economy to reduce financing costs.
There are also views that the current LPR quotation will continue to remain unchanged, because from the current liquidity improvement, it is not enough to drive the LPR down.
Wen Bin, chief researcher of China Minsheng Bank, believes that the above two views have some truth, and the reasons why the current LPR remains unchanged can be explained from the following aspects.
First, the interest rate of the Medium Term Lending Facility (MLF) has not changed.
LPR quotations are formed in the form of MLF interest rates plus points. MLF interest rates are the "anchor" of LPR and play an important role in determining LPR.
Based on historical experience, the central bank reduced the volume and continued to do MLF on July 15, but did not lower the MLF interest rate, indicating that the LPR will likely remain unchanged this month.
Secondly, there is a certain amount of pressure on the pressure drop point.
The other part of LPR is the bonus point of the bank. The current bank capital cost pressure is still relatively large, so under the commercial principle, there is pressure to drop the spread.
Although the reform of the deposit quotation mechanism has been implemented, it is the time deposits with a maturity of one year or more that are more affected. The impact on demand deposits and one-year deposit interest rates is limited, and the improvement in the short-term capital cost of banks is limited.
The minimum LPR reduction is 5 basis points. As banks are still facing greater pressure on the cost of liabilities, relevant measures are not enough to drive the pressure drop by 5 basis points.
Thirdly, there is still a customizing factor in the current LPR reduction.
From the perspective of economic recovery, my country’s economic data in June was better than expected. Manufacturing investment, consumption and other projects that had weaker recovery in the past have accelerated. The overall economic recovery is improving. Compared with the general reduction of LPR, what is needed is structure. Sexual cost reduction.
At the same time, uncertainties in the external environment have increased, and various signs indicate the need to be alert to the risk of the Fed's early shift. This is also a practical issue that my country needs to consider when adjusting the level of interest rates, including LPR.
It needs to be pointed out that the LPR quotation has continued to remain unchanged, which does not deviate from reducing costs for the real economy.
"In the first half of this year, the corporate loan interest rate was 4.63%, a year-on-year decrease of 0.16 percentage points; the contract interest rate for new loans issued by small and micro enterprises was 5.18%, 0.3 and 1.06 percentage points lower than the same period last year and the same period in 2019, respectively. While the LPR remains unchanged, the financial sector still adopts structural policies and continues to increase its efforts to reduce costs for the real economy.” Wen Bin said.
Wang Qing, chief macro analyst at Oriental Jincheng, believes that the LPR quotations remain unchanged this month, but the overall cut in the RRR has led to an increase in bank credit supply. Changes in supply and demand in the credit market may still drive banks to lower the spread in loan pricing, triggering a reduction in corporate loan interest rates. This will reverse the situation that the margin of corporate loan interest rates rose slightly in the first quarter.
In addition, considering that the regulators have repeatedly emphasized the need to continue to promote bank fee reductions since the beginning of this year, it is expected that the comprehensive financing costs of enterprises, including loan interest rates and various fees, will maintain a downward trend in the second half of the year, and ultimately promote the steady restoration of the job market.
The LPR has remained unchanged for 15 consecutive months, also sending a signal that the monetary policy will continue to maintain a steady tone.
Dong Ximiao, chief researcher of China Merchants Finance and a part-time researcher of Fudan University's Institute of Finance, said that the unexpectedly-than-expected full-scale RRR cut came into effect on July 15, but it does not mean that monetary policy has shifted from being prudent to loose.
For a period of time in the future, my country’s monetary policy will continue to adhere to a prudent tone and maintain continuity, stability and sustainability: in terms of total volume, “normality” will be highlighted, and liquidity will remain at a reasonable level. This will support economic growth and prevent risks. Seek a balance between them; in terms of structure, it will highlight "precision" and increase effective support for green development and small and micro enterprises.
"In the next stage, the macro policy should increase structural support for key areas and weak links on the basis of not engaging in flood irrigation. At present, the RRR cut has been implemented, and measures such as fee reductions are also being implemented. In the future, the central bank We will continue to maintain reasonable and abundant liquidity, and these policies will continue to promote the steady decline of the financing costs of small, medium and micro enterprises." Wen Bin said.
Yao Jin