© Reuters The central bank started the year to increase volume and continue MLF wide credit support to stabilize growth for more than 5 years. Will LPR be lowered?
News from the Financial Associated Press, January 16 (Reporter Wang Hong)Today, the central bank launched a 779 billion yuan medium-term lending facility (MLF) operation, and the MLF maturity this month is 700 billion yuan; the MLF operation interest rate this month is 2.75%, which has been at this level for 6 consecutive months since August 2022.
Experts in the industry said that the central bank implemented a net investment of 79 billion this month, which is a continuation of the increase for two consecutive months, which will help maintain a reasonable and sufficient market liquidity during the Spring Festival and maintain stable growth with wide credit. In addition, the MLF operating interest rate remains unchanged in January, and the current need to lower the policy interest rate is not high, and the market has already expected this.
Experts also said that in order to alleviate the downward pressure on the real estate market, it is expected that the LPR with a period of more than 5 years will drop even more. Another expert pointed out that, focusing on stabilizing growth at the beginning of the year, controlling risks, and promoting the property market to show a trend of recovery as soon as possible, the regulator may guide the quotation banks to lower the 5-year LPR quotation in the near future, which may be implemented on January 20 at the earliest.
MLF increases volume and continues to widen credit support for stable growth
Today, the central bank launched a 779 billion yuan MLF operation, and the winning bid rate was 2.75%, which was the same as before. The central bank also conducted a 14-day reverse repurchase operation of 74 billion yuan and a 7-day reverse repurchase operation of 82 billion yuan on the same day. The winning bid rates were 2.15% and 2.00%, the same as before. On the 16th, a total of 933 billion yuan of net investment was realized.
Wang Qing, chief macro analyst of Oriental Jincheng, pointed out that the MLF operation volume in January was 779 billion, and the maturity volume was 700 billion, which means that the central bank implemented a net investment of 79 billion this month, which is a continuation of the increase in volume for two consecutive months. The continuation of the MLF increase in January, in addition to conforming to the general rules before the Spring Festival, is more important to help banks “reasonably grasp the intensity and pace of credit extension, and make timely efforts.” The economy still faces certain downward pressure in the first quarter Against this background, we will increase loans to support stable growth with broad credit.
Wen Bin, chief economist of China Minsheng Bank, said that before the Spring Festival, the margin of liquidity tightened, and interest rates on funds and interbank certificates of deposit both rose again, and volatility increased. The tightening margin of liquidity before the festival is affected by multiple factors, including the increase in demand from residents before the Spring Festival, the peak tax payment period, and the payment of statutory deposit reserves. For this reason, the central bank has further increased the amount of MLF to show its care for the capital side, which can effectively stabilize market expectations and better play the role of the currency and bond markets in reducing the financing costs of market players.
Dong Ximiao, chief researcher of China Merchants Union, said that today’s MLF increase will help maintain reasonable and sufficient market liquidity during the Spring Festival, better stabilize market confidence and expectations, and ensure the smooth operation of the financial market.
January MLF operation rate unchanged in line with market expectations
Wang Qing believes that the fact that the MLF operating rate remains unchanged in January is that the macroeconomy is likely to face the “final drop” in the first quarter. It is not necessary to lower the policy interest rate at present, and the market has already expected this. With the rebound of residents’ consumption starting in the second quarter, the economy is expected to start a round of rapid recovery.
Wen Bin said that the MLF interest rate continued to remain unchanged in January. The main reasons include that the comprehensive RRR cut was just implemented in December last year, and the frequency of the policy does not need to be too frequent; the Spring Festival is approaching, and the effect of the rate cut policy is not strong at this time, and the time for the rate cut has not yet arrived; Since January of this year, the pace of credit issuance has been relatively fast. It is expected that credit in January will show the characteristics of “increase in volume and decrease in price”, which has actually achieved the effect of reducing interest rates.
It is expected that LPR with a period of more than 5 years may be lowered
Wang Qing pointed out that, focusing on stable growth at the beginning of the year, controlling risks, and promoting the property market to show a trend of recovery as soon as possible, the regulator may guide quotation banks to lower the 5-year LPR quotation in the near future, which may be implemented on January 20 at the earliest. Looking at the trend, in the first half of 2023, residential mortgage interest rates will continue to go through a process of downward adjustment, which is the key to improving demand in the property market.
Wang Qing also said that in terms of 1-year LPR quotations, the current corporate loan interest rate is significantly lower than the residential mortgage interest rate, and various structural support policy tools are abundant, which will guide corporate loan interest rates to continue to decline. Therefore, the 1-year LPR quotation in January Expected to remain stable. This will also to some extent make room for a larger reduction in 5-year LPR quotations.
Wen Bin also pointed out that considering that the interest rate cut is mainly to cooperate with the overall efforts of macro-control policies, the probability and necessity of reducing interest rates before and after the two sessions are higher. At this time, after the first wave of the epidemic is over, in order to ensure a stable “good start”, it is necessary to increase the continuation and hedging of demand-side stimulus policies. At that time, OMO and MLF policy interest rates may be lowered by 5-10bp, which will drive down the LPR; in order to alleviate the downward pressure on the real estate market, it is expected that the LPR with a period of more than 5 years will drop even more. However, compared with 2022, the overall policy interest rate adjustment space is relatively limited.
Dong Ximiao also pointed out that in 2022, household loans will increase by 3.83 trillion yuan, a year-on-year decrease of 4.09 trillion yuan. Among them, medium and long-term loans increased by 2.75 trillion yuan, a year-on-year decrease of 3.33 trillion yuan. The sluggish growth of household loans, especially medium- and long-term loans to households, is an important factor dragging down the growth of RMB loans in 2022, reflecting the still relatively sluggish real estate market and insufficient consumption willingness and demand of residents. We should continue to guide LPR, especially LPR with a period of more than 5 years, to a moderate downward trend, which not only reduces the burden of residential housing consumption, but also stimulates the medium and long-term financing needs of enterprises, promotes the stable and healthy development of the real estate market, and better promotes the steady recovery of the macro economy.
