CPI rise will not restrict the transmission mechanism of monetary policy dredging is the key

 CPI rise will not restrict the transmission mechanism of monetary policy dredging is the key

There is room for easing monetary policy

Statistics released by the National Bureau of Statistics show that CPI rose by 2.8% in August compared with the same period last year, with a forecast of 2.6% and a pre-value of 2.8%; PPI rose by - 0.8%, a forecast of - 0.9%, and a pre-value of - 0.3%. Specifically, the slightly higher year-on-year growth rate of CPI than market expectations is mainly due to the rise in food prices, especially pork prices and animal prices; while the expansion of PPI deflation is mainly due to the decline in means of production, industrial production is facing certain pressure.

Influenced by the downturn of PPI and insufficient demand, there is room for easing monetary policy in the future, Mingming, chief analyst of CITIC Securities consolidation, told First Financial Journalist. For the bond market, the threat of inflation is not fearful in the short term, and the current intensification of inflation differentiation will not cause a significant disturbance to the bond market. In addition, the August inflation data did not exceed expectations, and early market concerns about inflation were delayed until the end of the year.

Wen Bin, chief researcher of Minsheng Bank, also said that in general, Chinas inflation level is generally controllable, and monetary policy still has room for relaxation. It is necessary to further smooth the transmission mechanism of monetary policy, reduce the financing cost of real economy, stabilize investment and consumption, and ensure that the macro-economy continues to operate in a reasonable range. In view of the current changes in the internal and external economic situation, we need to maintain the strength of macro-control policies and coordinate the relationship between active fiscal policy and sound monetary policy. He said.

As for the late trend of inflation data, the mainstream view in the industry is that CPI is more likely to rise, or fluctuate around 3%. PPI will remain in a negative range in the near future. Among them, pork and related substitutes are the focus of CPI trend observation in the next stage.

So, will the rise of CPI restrict the easing of monetary policy? In this regard, many insiders believe that it is unlikely that monetary policy is affected by many factors, CPI is only one of them, and this round of CPI is driven by supply factors. Given that supply-driven inflation tends to be weak in sustainability, recent food price increases are unlikely to be the main constraints on monetary policy operations. With the transformation and restructuring of Chinas economy, the share of food in total consumer spending continues to decline. Central banks and markets may regard core CPI and PPI as more effective indicators of broad inflation and nominal return on investment.

China and Kim Macro said that it is necessary and necessary for China to loosen its monetary policy properly at present. The September 4 regular session and the September 6 reduction also confirm this judgment. The long-term policy objectives of CPI approaching 3%, superimposing structural deleveraging and financial risk prevention may restrict the strength and form of monetary policy relaxation to a certain extent. For example, relative to the lending rate, the current resident deposit rate has limited downward space.

Structuralization and Direction go hand in hand

Since this year, the focus of the central banks monetary policy has always been to dredge the transmission mechanism of monetary policy. In the past, the efficiency of monetary policy was mainly affected by two factors: too slow transmission speed and difficult control of capital flow. On the one hand, the risk premium of enterprise financing could not be reduced when the risk-free interest rate was significantly reduced; on the other hand, liquidity investment was excessively dependent on primary dealers, and the interbank capital chain was relatively long. As a result, the transmission of price signals is not smooth, which leads to structural contradictions in liquidity when the total amount is abundant.

Nowadays, the central bank is constantly improving the adjustment tools to guide the financial living water to better irrigate the real economy. For example, in order to improve the efficiency of cross-term and cross-variety transmission, the new LPR (loan market quotation rate) quotation mechanism has increased over five-year varieties and semi-linked with MLF (medium-term lending facility) interest rate, so that the central bank can still affect the LPR interest rate through MLF without changing the deposit and loan benchmark interest rate.

It is worth mentioning that LPR will make a second offer on September 20th, and the interest rate of most people in the industry will be reduced, but the driving force for the reduction is not the reduction of MLF interest rate, but the reduction of bid spread. Zhang Xu said, Under the background that the spread of LPR quotation has not been fully compressed, the current MLF interest rate should not be lowered, so as to better achieve the goal of market-oriented reform.

Huaxin Securities consolidation team also analyzed that the possibility of lowering MLF interest rate within a month is not very likely, because LPR only implemented the first quotation, the quotation mechanism has yet to be observed and improved, and there are still fewer new loans anchored by LPR. At this time, lowering MLF may reduce the policy space in the future. We think that the time window for MLF downward adjustment may be as early as October. Huaxin Securities said.

On the bond market, Deng Haiqing, a visiting professor at Renmin University of China, analyzed that if OMO (open market operation) and MLF interest rates were not lowered, and CPI was under 3% pressure, then the tone of the bond market shocks remained unchanged. This means that the current bond yield is at the limit of the volatility range, and the emergence of excess profits and incremental shortfalls may lead to a callback in the bond market. He said.

Source: First Financial Responsibility Editor: Guo Chenqi_NBJ9931