Several financial analysts and market participants interviewed by 21st century economic reporters said that on September 4, the National Regular Session made it clear that it was necessary to use universal and directional benchmarking tools in time to guide financial institutions to use more funds for inclusive finance. Therefore, the central bank lowered the benchmarking in this round, within market expectations.
In fact, since the meeting of the Political Bureau of the Central Committee held on 30 July, many regulatory meetings have made more pressured judgments on the economic situation. Changes in the economic situation also require flexible adjustment of monetary policy, and the market has long anticipated a reduction in the central banks benchmark. Relevant central bank officials said that the reduction released about 900 billion yuan of long-term funds, including a comprehensive reduction released about 800 billion yuan, targeted release of about 100 billion yuan, conducive to the real economic development.
Comprehensive + Directional Reduction Supports Real Economy
By reviewing the recent reduction operations of the central bank, we can find that since 2018, the central bank has carried out seven reduction operations (four in 2018 and three in 2019), which are more frequent than in 2016 and 2017. Five of them were directional lowering, and only two in January 2019 and September 2019 were comprehensive lowering.
From the point of view of lowering the benchmark, the central banks of the seven lowering benchmarks all emphasized that the lowering funds should be mainly used for the real economy and loans of small and micro enterprises, and strive to alleviate the financing difficulty and high cost of small and micro enterprises. In the announcement, it is also mentioned that the reserve requirement ratio for urban commercial banks operating only in provincial administrative areas should be reduced by 1 percentage point in order to support small and private enterprises.
Relevant central bank officials said that the reduction could increase the financial institutionsfinancial resources to support the real economy, and reduce the cost of bank funds by about 15 billion yuan per year, and reduce the real interest rate of loans through bank transmission. In terms of directional benchmarking, it is an important measure to improve the policy framework of three levels and two advantages for small and medium-sized banks with low deposit reserve ratio, which is conducive to promoting urban commercial banks serving the grass-roots level to increase their support for small and small private enterprises.
Universal reduction in time can effectively reduce the cost of bank capital and guide banks to reduce the point spread under the new LPR mechanism, thus reducing the financing cost of the real economy. Wen Bin, chief researcher of Minsheng Bank, said, In addition, in the context of the resumption of monetary easing by the global central bank, there is still room and necessity for the reduction of policy interest rates in the light of Chinas current macroeconomic operation, inflation level and business operation. The one-year quotation rate of LPR is expected to decrease by 5 BP to 4.2% on September 20.
At present, there are two difficulties for banks, one is liquidity restriction, the other is asset shortage. The governor of a village bank in Gansu province told the 21st century economic reporter that after returning to the statement, banks are restricted by capital adequacy ratio and the available credit limit is limited. After the incident of a city commercial bank, the trust of the market to the small and medium-sized financial institutions has been reduced and the liquidity stratification has appeared. This reduction can alleviate the liquidity problem, and the directional reduction can alleviate the rising cost of the city commercial bank. But for the second asset shortage problem, besides monetary policy adjustment, it also needs to cooperate with fiscal and industrial policies. Not in a day or two.
Reducing the standard is not draining water, which has limited impact on the real estate market.
Every time the benchmark is lowered, there will be some voices in the market that this is equivalent to the monetary policy opening the gates and releasing the water, which may lead to the rise of asset prices and other issues. In response, the central bank said that the reduction would hedge against the tax period in mid-September, the total liquidity of the banking system would remain basically stable, and the implementation of the targeted reduction in two times would also be conducive to the steady and orderly release of funds. This reduction is not a flood of water, and the orientation of sound monetary policy has not changed.
Several market participants interviewed by 21st century economic reporters said that the impact of the reduction on the real estate market was limited.
On the other hand, after the benchmark reduction, market participants generally believe that the price of LPR in late September will be reduced by 5-10 BP. How will the mortgage rate linked to it operate?
Earlier, the central bank issued a notice saying that October 8, 2019 is the conversion date of pricing benchmark. Before that, loan banks need to modify loan contracts, upgrade systems, organize staff training, and take various ways to do a good job of publicity and interpretation for customers to ensure that the transformation process is smooth and orderly. By October 8, 2019, loans that have been granted and signed but have not been granted are still executed in accordance with the original contract.
According to a person from Beijing, the new pricing benchmark of commercial personal housing loan interest rate in Beijing is the first set of LPR plus 55 BP and the second set of LPR plus 105 BP. In addition, it is reported that China Merchants Bank Shenzhen has also linked some mortgage business LPR, the first suite interest rate is 5.15%, the second suite interest rate is 5.45%, slightly higher than before.
A person close to the central bank told economic reporters in the 21st century that the interest rate of mortgage loans should be changed from the reference benchmark interest rate to the reference LPR. The switching of these two mechanisms should keep the overall stability. After the switching, the increase of the interest rate of mortgage loans will be affected by two aspects. One is that the change of the loan market reflected by the LPR will reflect the price. The second aspect is the trend of the real estate market.
The Next Step of Monetary Policy
After this reduction, the market is also very concerned about whether there is room for interest rate reduction in China and how monetary policy will be adjusted under the background of the interest rate reduction tide of the global central bank.
Wenbin said that in the context of the resumption of monetary easing by the global central bank, it is still necessary to reduce policy interest rates in the light of Chinas current macroeconomic operation, inflation level and business operation. From an inflationary point of view, the current inflationary pressure is mainly caused by rising food prices caused by the rapid rise in pig prices. However, governments at all levels have taken various measures to ensure pork supply. Recently, prices of vegetables and fruits have begun to fall, and the future inflation level is generally controllable. Then we consider that PPI has already seen negative growth, and the next stage of monetary policy still exists. Space. Said gently.
On the one hand, LPR reform is accelerating, on the other hand, other central banks around the world may cut interest rates in September, which will open up space for future interest rate cuts. I judge that in the future, MLF interest rates may be lowered to further hedge internal and external risks, so as to maintain employment and stability. Growth.
In addition, compared with the open market operation, lowering the benchmark as a signal is more stimulating and more conducive to multi-dimensional improvement of market confidence. Li Chao of Huatai Securities believes that the future policy will focus on maintaining stability, hedging external uncertainties and increasing support for the real economy. It is expected to usher in a double Bull Stock and debt market before National Day.
The central bank said that it would continue to implement a sound monetary policy, not flooding, focusing on directional regulation and control, taking into account internal and external balance, increasing counter-cyclical regulation, maintaining a reasonable and sufficient liquidity, and maintaining a basic match between the growth rate of M2 in broad sense and the growth rate of nominal GDP, so as to provide high-quality development and supply-side structure. Reform to create a suitable monetary and financial environment.
Source: Responsible Editor of 21st Century Economic Report: Zhong Qiming_NF5619