BEIJING, June 17 (Zhongxin Finance Gong Hongyu) Policy interest rates have been lowered one after another! After the 7-day reverse repurchase (OMO) operating interest rate and the standing loan facility (SLF) interest rate were lowered by 10 basis points on June 13th, the medium-term loan facility (MLF) interest rate was also lowered by 10 basis points on the 15th. Analysts expect that the loan market quotation rate (LPR) to be announced on the 20th may also be adjusted.
Why did the central bank intensively cut interest rates at this time? What kind of signal is transmitted? Can the mortgage be paid less again?
On June 15th, 7 days reverse repurchase operation interest rate and MLF interest rate.
Interest rate "linkage" reduction
According to the morning news of the central bank official website on 13th, the central bank launched the reverse repurchase operation of 2 billion yuan by way of interest rate bidding, and the interest rate dropped to 1.9%. On the evening of 13th, the central bank announced the latest SLF interest rate table. After the SLF interest rate is lowered, the overnight variety is 2.75%, the 7-day variety is 2.90%, and the one-month variety is 3.25%. On the 15th, the central bank launched a medium-term loan facility of 237 billion yuan, and the winning bid rate of MLF dropped to 2.65%.
June 13th, SLF interest rate table.
Why are the interest rates of various varieties adjusted? What is the difference between different interest rates? In fact, these three types of interest rates are all important components of China’s policy interest rate system. Among them, OMO is a short-term monetary policy tool, MLF is a monetary policy tool to provide medium-term base money, and SLF is a normal liquidity supply channel for the central bank.
Behind the collective downward adjustment, it reflects the "linkage" relationship behind various interest rates. Zhou Maohua, a macro researcher in the financial market department of China Everbright Bank, told the media that the central bank’s recent interest rate cut action is to pass the "reverse repurchase rate — Interest rate corridor ceiling interest rate (SLF)— MLF interest rate — Loan market quoted interest rate (LPR)— The transmission mechanism of loan interest rate.
From the historical experience, the spread between 7-day SLF interest rate and OMO interest rate is 100 basis points. The MLF interest rate often fluctuates in the same direction and amplitude with the OMO and SLF interest rates. Therefore, after the OMO adjustment on the 13th, it is generally believed in the industry that the interest rate decline of SLF and MLF belongs to the expected adjustment.
Why is the interest rate cut after ten months at this time?
Before this round of adjustment, the interest rates of OMO, SLF and MLF have all remained unchanged for ten consecutive months, and the last change was on August 15, 2022.
Why cut interest rates after many months? Just recently, when Yi Gang, governor of the central bank, went to Shanghai for investigation, he pointed out that the People’s Bank of China will continue to implement a prudent monetary policy accurately and forcefully, strengthen countercyclical adjustment, fully support the real economy, promote full employment, and maintain currency stability and financial stability.
Under the current economic background, experts believe that this round of central bank’s "three arrows in one go" interest rate cut is an action to strengthen countercyclical adjustment, releasing a positive signal to support the real economy, which is conducive to guiding market expectations and boosting confidence.
According to the latest financial data released by the central bank, although the current credit and social financing increments remain stable overall, they still need to be boosted. In May, the scale of social financing increased by 1.56 trillion yuan, a year-on-year decrease of 1.31 trillion yuan; RMB loans increased by 1.36 trillion yuan, a year-on-year decrease of 541.8 billion yuan.
In addition, from the perspective of price level, the national consumer price index (CPI) decreased by 0.2% month-on-month and only increased by 0.2% year-on-year, which was lower than market expectations.
Dong Ximiao, chief researcher of Zhaolian, said in an interview with Zhongxin Finance that since the beginning of this year, China’s macro-economy has recovered, but the recovery situation is not stable enough, the confidence and expectations of market players are still weak, and some small and medium-sized enterprises have not yet got out of the Woods.
Dong Ximiao mentioned that the central bank lowered the 7-day reverse repurchase operating rate on the 13th, conveying signs that the policy interest rate has loosened. Subsequently, SLF and MLF interest rates also fell by 10 basis points. The decline in policy interest rates will help to further reduce the cost of bank funds.
Yang Delong, chief economist of Qianhai Open Source Fund, believes that the central bank’s interest rate cut will help reduce the interest rate burden of corporate and personal loans, and at the same time promote the inflow of funds into the investment and consumption fields, and stimulate economic recovery.
If LPR is lowered, can the mortgage be repaid less?
With the downward adjustment of MLF interest rate, LPR, as the next link of interest rate transmission, is also considered to be likely to be lowered this month.
Dong Xiwei said that this round of central bank interest rate adjustment, superimposed on the deposit interest rate has been lowered several times since September 2022, and the bank’s debt cost has declined, which makes LPR expected to end its "inaction" for nine consecutive months this month.Or it will drop by 5 to 10 basis points.
It is worth mentioning that if LPR is lowered, the loan interest rate closely linked to LPR is also expected to usher in a new wave of adjustment. Dong Ximiao mentioned that the downward adjustment of LPR is conducive to promoting the stable and healthy development of the real estate market.Interest rates on existing mortgages and new mortgages will both fall, reducing the burden on housing consumers.It also helps boost residents’ consumption and investment.
In view of the current economic operation, Dong Ximiao believes that the next step is to take targeted measures as soon as possible to stabilize the expectations of market participants, boost their confidence and further boost consumption and investment. (End)