Wang Qing et al.: In September, MLF's affordable shrinkage of the policy rate may be reduced before the end of the year

Zhongxin Jingwei, September 15th. Question: September MLF's affordable shrinkage Policy interest rate before the end of the year may decrease again

Author Wang Qing Dongfang Jincheng Chief Macro analyst

Yan Jun Oriental Jincheng Analyst

Feng Lin Oriental Jin Cheng analyst

On September 15, 2022, the People's Bank of China launched an operation of 400 billion yuan (convenient for medium -term borrowing). The MLF expired this month was 600 billion yuan; the MLF operating interest rate this month was 2.75%, and the last month was 2.75%.

In September, the MLF operating interest rate remained unchanged, mainly due to the current policy observation period after the accident was lowered last month; in the later period, it focused on the effect of effectively expanding the total macroeconomic demand. The MLF operating interest rate still had room to reduce. The domestic price situation and the exchange rate of the RMB will not constitute a substantial obstacle to policy interest rate cuts.

In August, the policy reduction was implemented, and the MLF interest rate in September was not in line with market expectations. On the one hand, the economic repair process has recently fluctuated slightly, but the urgency of continuously lowered MLF interest rates is not high. On the other hand, after the interest rate cut in August, various market interest rates generally declined. At the same time, in the context of the continuous introduction of the continued introduction of the continuous growth of the stable growth, the impact of MLF interest rates on investment and consumption in August also needs further observation of the impact on investment and consumption.

How to look at the future of MLF interest rates? We judge that it may be reduced again by the end of the year. First of all, affected by the increase in downward pressure on the global economy in the second half of the year, the growth rate of China's exports may continue the fluctuation downward trend began in August. This means that the possibility of foreign demand on economic growth may be weakened, and domestic demand is required in time. At the same time, the epidemic factors can continue to disturb the domestic economic restoration before the end of the year. As a result, in order to hedge the influence of weakening and epidemic disturbance, it is necessary to continue to introduce staged policy measures such as increasing consumption and expansion to ensure that the economy is in a reasonable operating range, and policy interest rate cuts may become one of the candidate policy tools.

Secondly, the downturn in the property market deserves attention. By implementing measures such as the reduction of mortgage interest rates and the relaxation of regulatory policies, there have been signs of the property market recently, but the momentum of recovery is not obvious. Affected by this, the current downward pressure on real estate investment and housing consumption is high, and credit risks of real estate companies are still exposed. We judge that we focus on promoting the property market as soon as possible and preventing the risk of preventing and controlling. In the next five -year LPR (loan market quotation interest rate) quotation or continuous reduction; in addition to reducing the cost of bank capital, guiding the quotation to compress the LPR quotation plus points, directly The MLF interest rate is the most effective means to drive the 5 -year LPR quotation.

Finally, the domestic price situation and RMB exchange rate fluctuations will not constitute a substantial obstacle to policy interest rate cuts. In sharp contrast to the US and European high inflation, the domestic monetary policy has sufficient conditions "mainly me." In August, the MLF interest rate has shown that during the Fed's rapid interest rate hike, the People's Bank of China could implement interest rate cuts. In terms of the RMB exchange rate, due to the recent significant impact of the US dollar index, the RMB exchange rate against the US dollar is facing "breaking 7". However, the three major basket of RMB exchange rate index continued to run strongly, and this situation has not changed after the interest rate cut in August. In other words, the depreciation of the current RMB against the US dollar is not an effective standard for measuring the strength of the RMB exchange rate. In addition, under the prospects of the continuous restoration of the domestic economy and the continuation of a large scale of the balance of income and expenditure, it is difficult to effectively gather RMB depreciation expectations in the short term. This means that the RMB's risk of depreciation from the US dollar is not great, and it also means that even if the RMB "breaks 7" against the US dollar exchange rate, it will not flexibly adjust the central bank's monetary policy to constitute substantial constraints.

On the whole, after the epidemic in 2020, domestic monetary policy has always insisted on not engaged in large water irrigation, prices continue to be at a mild level, and the economy basically faces a stable support for the RMB exchange rate. As a result, both the quantitative tools and the price tool, the monetary policy has the conditions to further develop in the direction of steady growth. In summary of various factors, we judge that MLF interest rates have also been lowered before the end of the year, which may be as early as October; from cherishing monetary policy space and considering the perspective of multi -party balance, the lowering range may still be 10 basis points.

In September, the MLF shrinkage sequel was mainly related to the recent market interest rates significantly lower than the policy interest rate, and the reduction of market demand. It was also released to prevent the market's policy signals from excessive liquidity and guiding banks to increase the real economy credit.

The MLF interest rate remained unchanged in September, which means that the foundation of the LPR quotation of the month has not changed. In addition, the August LPR quotation has just undergone asymmetric lowers. We predict that the probability of continuously reduced the LPR quotation in September is less. If there is a super -expected change, it may be that the 5 -year LPR quotation will be reduced by 15 basis points alone. The main driving force is that the recent bank deposit cost is declining. It is worth mentioning that from September 15th, a number of state -owned banks have lowered personal deposit interest rates again. Among them Essence Based on various factors, we judge that the LPR quotation of the first five years at the end of the year still has about 20-30 base points. (Zhongxin Jingwei APP)

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