On June 17, the People's Bank of China (hereinafter referred to as "the central bank") carried out a 4-billion yuan 7-day reverse repurchase operation and a 182 billion yuan medium-term lending facility (MLF) operation to maintain a reasonable and sufficient liquidity of the banking system, and the operating interest rates remained unchanged at 1.8% and 2.5% respectively. Given that 237 billion yuan of MLF expired on that day, the PBOC realized a net withdrawal of 51 billion yuan in the open market.
From the perspective of MLF operation scale, the central bank continued to operate in the same amount in May after shrinking in March and April, and returned to shrinking this month.
Wang Qing, the chief macro analyst of Oriental Jincheng, told the reporter of Securities Daily that the recent MLF launch volume was low, and it was generally in a shrinking or equivalent continuation state, mainly affected by weak credit demand and financial "water squeeze". Recently, the pace of bank credit supply has slowed down, the liquidity of the banking system is relatively abundant, and commercial banks have low demand for MLF operations.
Wind data shows that in May, the average yield to maturity of 1-year AAA interbank deposit certificates dropped to 2.09%, significantly lower than the current MLF operating interest rate of 2.5%; Since June, as of June 14, the average value of this indicator has further dropped to 2.05%.
Wang Qing predicted that in the third quarter, with the gradual weakening of the impact of financial "water squeeze", the acceleration of bank credit supply, and the continued high level of government bond issuance, banks' operational demand for MLF will increase, and MLF is expected to turn to volume increase for continuation.
In the opinion of Wen Bin, chief economist of China Minsheng Bank, the disturbance of funds in June was limited, so the necessity of reducing the reserve ratio or continuing the MLF increase was not high. In addition, considering that the current MLF and interbank deposit certificate interest rates are more inversely linked, the contribution of MLF to maintaining stability across quarters is also low. Considering the relatively cautious attitude of the central bank towards the pace of monetary easing since April, it is expected that the central bank will still inject liquidity moderately through month end reverse repurchase volume, calm the periodic disturbances such as credit supply and financial fund return, and maintain the stable operation of capital interest rate.
From the perspective of MLF operating interest rate, since it was lowered from 2.65% to 2.5% in August last year, it has been "standing still".
"Since this year, the People's Bank of China has made public many times that there is still room for monetary policy, but the effect of early policy is still apparent, and will continue to make counter cyclical adjustment in the future in light of changes in the situation." Wen Bin said that further interest rate cuts are still facing internal and external "double constraints". Internally, interest margin stabilization and risk prevention are still influencing factors; Externally, the RMB exchange rate is also an important consideration.
Wang Qing analyzed that the MLF operating interest rate remained unchanged this month for two main reasons: first, the long-term market interest rate declined significantly in the early period, and the central bank warned about the risk of interest rate fluctuations on many occasions; Recently, the long-term market interest rate has stabilized, but it still deviates significantly from the policy interest rate center. In addition, the recent decline of loan interest rate may mean that the urgency of cutting the policy interest rate is not high. Second, the economic growth in the first quarter exceeded expectations, and the macro data in the second quarter fluctuated greatly, which is currently in the policy effect observation period as a whole.
"Considering that the price level will remain low for a period of time in the future, and the momentum of economic growth needs to be further strengthened, cutting the MLF operating interest rate in the third quarter is still one of the important policy options," said Wang Qing.
Wen Bin believes that in order to further boost domestic demand, promote the moderate recovery of prices, and increase support for the real economy, it is still necessary to use aggregate tools, and monetary policy will continue to be loose. With the gradual easing of internal and external constraints, the pace of monetary easing may be accelerated in the second half of the year, and there is still room for the reduction of reserve requirements and interest rates.
"The window of interest rate reduction is expected to open in the third quarter, and the criteria for interest rate reduction need to wait for an opportunity to make a discretionary choice according to the liquidity situation." Wen Bin said that in the future, in order to stabilize the economic operation, more efforts should be made in fiscal policy. From the estimated net financing amount of government bonds, the liquidity pressure from May to October was fair. From November to December, the liquidity pressure was relatively large due to the low maturity of government bonds. At the same time, considering that the MLF maturity in the fourth quarter was also the highest, the reserve ratio may be reduced at the end of the third quarter or the fourth quarter to protect liquidity and ease the pressure of the central bank to continue MLF.
