Zhongxin Jingwei January 19 Title: When the "three steps" of steady growth are underway
Author Zhao Wei Chief Economist of Guojin Securities
On January 17, the central bank launched a 700 billion yuan 1-year MLF (medium-term lending facility) operation and a 100 billion yuan 7-day open market reverse repurchase operation, and the winning interest rate fell by 10 basis points. In our view, the rate cut is in line with expectations, the timing is slightly more than expected, or due to the relatively sluggish economy at the beginning of the year and weak financing demand. Stable growth of the currency first, the follow-up also needs to form a joint force between finance, financial institutions and state-owned enterprises.
Previously, we pointed out that the december 1-year LPR (Loan Market Quotation Rate) cut in December 2021 is the beginning of a new round of easing cycle, and reducing bank costs is the key to reducing the cost of physical financing and stimulating economic vitality. The reduction of the MLF and open market operation interest rates is basically in line with market expectations, and the time is slightly advanced. At the same time of "price reduction", the central bank continued to "increase the amount", on the basis of the comprehensive reduction of the RRR in December 2021, the MLF exceeded 200 billion yuan in January, which further highlighted the policy "strengthening" attitude.
MLF delivery
We believe that the next 1-year LPR will decline, and the possibility of a 5-year LPR reduction is not ruled out. Under the framework of the current LPR anchoring MLF interest rate, the decline in MLF interest rates will bring about a downward adjustment of the LPR, and the 1-year LPR quotation may follow the decline by 10 basis points; but the 5-year LPR change may need to consider the balance of stimulating entity demand, adhering to the positioning of "housing and not speculation", and reducing the downward adjustment or directed downward adjustment of the enterprise loan increase.
Under the existing framework, the MLF declines or drives the LPR to decline
This interest rate cut may not be the end of a new round of monetary easing. Experience shows that the monetary easing cycle often appears in the economic pressure stage, generally will be multiple RRR cuts and interest rate cuts. A new round of easing cycle that began at the end of 2021, the RRR cut and interest rate cut have landed, under the contraction of demand, the currency may still be further relaxed, and the subsequent easing rhythm and strength will depend on the effect of stable growth landing. While liquidity is loose, the central bank may continue to use refinancing, direct tools, etc., to guide financial institutions to increase key support for small and micro enterprises, scientific and technological innovation, green development and other fields.
Experience shows that the monetary easing cycle generally corresponds to multiple RRR cuts
Stable growth of the currency first, policy "strengthening" needs to be "combined fist", and it is necessary for money, finance, financial institutions and state-owned enterprises to form a joint force. In 2022, in addition to fiscal fronts, carry-over balances, and central deficits, we may also need assistance from policy-oriented financial institutions and market-oriented financing of high-quality state-owned enterprises. Under the "storage force" of financing, the acceleration of the start of reserve projects will drive the gradual release of demand and hedge the downward pressure on the economy.
Fiscal balances for 2021 support the 2022 fiscal front
Under the increase of steady growth, the "policy bottom" has been consolidated, and the "economic bottom" may soon appear. Overall, the "three-step" of stable growth is in progress: the first step, monetary easing, stable growth-related financing to accelerate growth; second, stable growth-related measures to accelerate the landing, driving the improvement of entity demand, it is expected that the marginal improvement in the third quarter is the most obvious; the third step, the economic expectations are repaired, and the GDP growth rate is improved. (Zhongxin Jingwei APP)
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Editor-in-Charge: Zhang Zhihan