After Premier Li Keqiang stated on December 3 that the RRR cut in due course, the overall RRR cut was quickly implemented.

At 17:00 on December 6th, the People’s Bank of China issued an announcement stating that in order to support the development of the real economy and promote the steady decline of comprehensive financing costs, it was decided in December 2021. On the 15th, the deposit reserve ratio of financial institutions was reduced by 0.5 percentage points (excluding financial institutions that have implemented a 5% deposit reserve ratio). After this reduction, the weighted average deposit reserve ratio of financial institutions was 8.4%.

This is the second time the central bank has cut its RRR in this year. On July 9th of this year, in order to support the development of the real economy and promote a steady decline in comprehensive financing costs, the Central Bank also announced a 0.5% reduction in the deposit reserve ratio of financial institutions (excluding financial institutions that have implemented a 5% deposit reserve ratio).

The market has already expected the overall RRR cut this time.

Li Keqiang pointed out on the afternoon of December 3 that China will continue to coordinate epidemic prevention and control and economic and social development, implement stable macro policies, and strengthen pertinence and effectiveness. Continue to implement a prudent monetary policy, maintain reasonable and abundant liquidity, formulate policies based on the needs of market players, reduce the RRR in due course, increase support for the real economy, especially small, medium and micro enterprises, to ensure the stable and healthy operation of the economy.

A total of about 1.2 trillion yuan in long-term funds released in July

compared to about 1 trillion yuan released in July’s full RRR cut Long-term funding, this time the RRR cut has released a total of about 1.2 trillion yuan in long-term funding.

It is worth mentioning that, like the overall RRR cut in July, the central bank also emphasized this time that the RRR cut is a routine operation of monetary policy, and some funds will be Used to replace expired “spicy powder”.

“A part of the funds released will be used by financial institutions to return the maturity of the medium-term loan facility (MLF), and part of the funds will be used by financial institutions to supplement long-term funds. To meet the needs of market entities.” The relevant person in charge of the central bank said.

On December 15, a total of 950 billion MLF expired on the open market.

“For the central bank, there is the Fed’s steering restriction on the outside and inflationary pressure on the inside. The RRR cut can avoid the formation of a strong lenient.Loose expectations, and moreover, there will be 950 billion MLF due, which can give sufficient replacement space for the RRR cut funds. “Huatai Securities pointed out.

Huachuang Securities chief macro analyst Zhang Yu pointed out that the RRR cut is required by the central bank to adjust the balance sheet structure.

She said that as of October 2021, the central bank’s claims on other depository companies accounted for 33.69% of total assets, which once again exceeded one-third of the central bank’s assets. In November, the central bank had already The 1 trillion MLF was sequel, and there are still 1.45 trillion MLF due in December and January next year. The operation of the sequel is relatively difficult, so it is a better choice to reduce the RRR or adjust the balance sheet structure of the central bank.

For the purpose of this RRR cut, the relevant person in charge of the central bank gave the answer in answering reporters’ questions to strengthen inter-cycle adjustment, optimize the capital structure of financial institutions, and improve financial services Ability to better support the real economy.

First, while maintaining reasonable and abundant liquidity, it effectively increases the long-term stable funding sources for financial institutions to support the real economy and strengthens financial institutions Capital allocation capabilities. The second is to guide financial institutions to actively use the RRR cut funds to increase support for the real economy, especially small, medium and micro enterprises. Third, the RRR cut will reduce the capital cost of financial institutions by approximately 15 billion yuan per year, which can be transmitted through financial institutions. Promote the reduction of social comprehensive financing costs.

“In the third quarter of this year, China’s economic growth began to slow down. GDP increased by 4.9% year-on-year and only 0.2% month-on-month. Downward pressure. Although there is not much pressure to complete this year’s economic growth target, for next year, economic work will face considerable pressure and challenges. At the end of this year and the beginning of next year, the RRR cut will help ease the downward pressure on the economy and smooth the economic growth curve. There is not only room but also a necessity. This is the intended meaning of a good inter-cyclical adjustment. “China Minsheng Bank chief researcher Wen Bin pointed out.

The central bank said that the orientation of the prudent monetary policy has not changed

After the overall RRR cut is implemented, the central bank is reducing the RRR for the follow-up monetary policy trend that the market is concerned about Both the announcement and the reporter’s questions emphasized that the normal monetary policy is adhered to and the orientation of the prudent monetary policy has not changed.

The central bank stated that it will continue to implement a prudent monetary policy, adhere to a stable policy, avoid flooding, and take into account both internal and external balances, and maintainReasonable and abundant liquidity, keep money supply and social financing scale growth basically in line with nominal economic growth, strengthen inter-cyclical adjustments, make overall arrangements for the convergence of macro policies this year and the next, and support small and medium-sized enterprises, green development, and technological innovation. Quality development and supply-side structural reforms create a suitable monetary and financial environment.

Wen Bin said that the RRR cut should not be interpreted as a change in the orientation of monetary policy. After the peak of the epidemic in my country last year, monetary policy gradually returned to normal. The central bank mainly adjusted market liquidity through reverse repurchase and MLF operations, and guided market interest rates to operate around policy interest rates. This conventional mode of liquidity adjustment has basically taken shape. On December 15th, 950 billion yuan of MLF will expire, and the issuance of government bonds, the peak of tax payment, the end of the year and the beginning of the year are approaching, which may cause the liquidity gap to increase. Part of the funds released by the RRR cut can be used to return the MLF that expires to reduce the pressure on the central bank’s open market operations, and the other part of the funds will be used to supplement medium and long-term funds, helping to maintain reasonable and sufficient liquidity.

Will there be interest rate cuts after the RRR cut?

After the overall RRR cut is implemented, the market is also concerned about the subsequent funding and interest rate trends.

As for the funding in December, China Sea Securities pointed out that after the RRR cut, there is no obvious gap in the base currency during the year, and it will form an impact on the funding at the end of the year. Further positive.

The agency pointed out that as the issuance of special bonds comes to an end during the year, fiscal funds will then be gradually allocated, and the funds will be fully “filled.” Further considering the implementation of the RRR cut in December, the “fiscal funds transfer + the implementation of the RRR cut” will form a strong support for funds, and the state of loose liquidity may continue until the beginning of next year.

As for whether there will be interest rate cuts after the RRR cut, there are different market views.

Shenwan Hongyuan is not expected to cut interest rates. “Rate cut without interest rate cut” is still a quantitative care in the direction of currency neutrality, which focuses on “neutrality with temperature”. “.

The agency believes that, first, the operational target attribute of the reverse repo rate is strengthened. The central bank’s current short-end inter-bank interest rate is around a 7-day reverse repo rate of 2.2%. The pattern of narrow fluctuations is very satisfactory, which means that the central bank will not operate quantitative tools to the point of excessive liquidity. In the process of accelerating the tightening of overseas monetary policy, the target of the policy interest rate curve will be lowered.It is also easy to cause a substantial depreciation of the renminbi. Second, the reduction of LPR may directly lead to a significant narrowing of commercial banks’ deposit and loan spreads and substantial loss of profits, which will erode the potential future asset expansion capabilities of the banking industry, and will not be conducive to long-term currency credit control.

However, the market also has different voices.

Zhang Yu believes that there is a possibility of interest rate cuts in 2022. From an ought point of view, the first half of 2022 has the “should” nature of the start of interest rate cuts (economic growth is at the bottom of the potential growth rate, industrial corporate profits may be negative in the second quarter, direct tools must be available, but it may be difficult to walk on one leg. , Huachuang’s macro DR007 model guides that economic operations should match the lower DR007 interest rate); from a practical point of view, after the autumn of 2022, there may be restrictions on US interest rate hikes. In the current economic down cycle, 2022 will be left to the decision-makers to smoothly relax. The strategic window is not very long.