Down 15 basis points, the central bank just ＂cut interest rates＂!

On August 22nd, the People’s Bank of China authorized the National Interbank Funding Center to announce the quoted interest rate (LPR) of the new loan market, in which the one-year LPR was 3.65% (3.7% last month) and the one-year LPR was 4.3% (4.45% last month). This means that the 1-year LPR will cut interest rates by 5 basis points compared with last month, and the 5-year LPR will cut interest rates by 15 basis points.

It is worth noting that the downward adjustment of LPR over five years is conducive to reducing the interest payment pressure of personal mortgage. Take the mortgage loan of 1 million with a term of 30 years as an example. If equal monthly repayment is chosen, the five-year LPR will be lowered by 15 basis points, which will reduce the monthly repayment amount by nearly 88 yuan and the total interest paid by nearly 32,000 yuan.

Experts believe that this round of asymmetric downward adjustment of LPR not only conveys the policy tone that monetary policy will remain loose, but also shows the policy signal that we will continue to care for stable economic recovery and confidence restoration, but not over-stimulate and continue to prevent funds from idling. Lowering the LPR by 15 basis points over five years will guide financial institutions to further reduce the interest rates of new and existing mortgages, reduce the burden on most loan buyers, stimulate residents’ housing consumption demand, and promote the stable and healthy development of the real estate market. Next, monetary policy should be strengthened in many aspects, not only to maintain price stability, but also to promote economic growth, boost confidence and expectations, and better help economic and social recovery.

LPR is asymmetrically lowered and monetary policy is overweight to stabilize the economy.

Previously, since the People’s Bank of China launched a 400 billion yuan medium-term lending facility (MLF) operation and a 2 billion yuan open market reverse repurchase operation on August 15th, the winning bid rates of the MLF operation and the open market reverse repurchase operation both dropped by 10 basis points. In the case that the pricing basis has changed, the market generally expects that the LPR quotation will be lowered this month.

The the State Council executive meeting held on August 18th further clarified that the LPR quotation will be lowered this month. The Standing Committee of the State Council pointed out that it is necessary to improve the formation and transmission mechanism of market-oriented interest rates, give play to the guiding role of quoted interest rates in the loan market, support the recovery of effective demand for credit, and promote the reduction of comprehensive financing costs for enterprises and personal consumption credit costs.

However, the market failed to form a unified opinion on how to lower the LPR quotation. Some viewpoints once thought that the LPR for one year and five years or more was lowered by 10 basis points. This LPR quotation adjustment is asymmetric downward adjustment, with 1-year LPR quotation reduced by 5 basis points and 5-year LPR quotation reduced by 15 basis points.

Ming Ming, chief economist of CITIC Securities, said that under the current situation that the demand for medium and long-term loans needs to be boosted, the "asymmetric reduction" of LPR will be more in line with the current policy objectives, which will help banks to make more profits from medium and long-term loans and release the demand for medium and long-term loans.

Dong Ximiao, chief researcher of Zhaolian Finance, said that this round of LPR downgrade has further reduced the financing costs of enterprises and residents. Wide credit needs cost reduction support. Through LPR, financial institutions are guided to continue to reduce the financing costs of market participants, reduce the burden on enterprises and residents, stimulate the financing needs of enterprises and residents, and enhance the stability of total credit growth. On the other hand, it helps to stabilize the confidence and expectations of enterprises and residents. At the same time, in the case that the developed economies such as the United States continue to raise interest rates, the LPR has declined this month, indicating that China’s monetary policy is more committed to "focusing on me" and taking into account external balance.

The interest rate of housing loans is expected to be reduced, and the expectations of the property market will be actively reversed.

Lowering the LPR by 15 basis points over five years will undoubtedly boost the demand for medium and long-term loans and effectively reduce the financing costs of residents and enterprises. In the opinion of many experts, the adjustment of LPR over five years will effectively boost the real estate market, which is still in the bottoming stage.

Pang Ming, chief economist and head of research department of Jones Lang LaSalle Greater China, told the Securities Times reporter that the asymmetric reduction of LPR by 15 basis points over five years is conducive to the completion of the important tasks of stabilizing expectations, stabilizing the main body, stabilizing growth, ensuring the delivery of buildings, ensuring people’s livelihood and ensuring stability. It can not only reduce the mortgage cost and monthly payment of buyers, but also promote banks to further reduce loan interest rates, actively lend to meet residents’ reasonable demand for housing, and promote developers to pay back money and help ensure housing.

Wen Bin, chief economist of Minsheng Bank, also believes that lowering the policy interest rate and then guiding the LPR downward will also help to release dividends to existing mortgage loans and raise residents’ consumption expectations.

Sun Binbin, deputy director of TF Securities Research Institute and chief analyst of fixed income, pointed out that considering Politburo meeting of the Chinese Communist Party’s demand for "stabilizing the real estate market", it is necessary to further reduce the interest rate of housing loans and move closer to historical lows. Referring to the lowest level in history, the interest rate of the first home loan reached 4.158% at the end of 2008, and the weighted average interest rate of individual housing loan was 4.34%. At present, the two indicators are 4.25% and 4.62% respectively, and it needs to be reduced by at least 10 and 28 basis points to reach the historical low.

However, in addition to the downward adjustment of LPR over five years, Zhang Dawei, chief analyst of Zhongyuan Real Estate, also called for the current policy of stabilizing the property market to continue to upgrade. At present, the problems faced by the property market are more about the expectation of the economy, and more and more active policies are needed to stabilize the property market. Only by truly reducing the cost of buyers can the market be stable.

The process of wide credit has been accelerated, and it is still possible to cut interest rates again.

Looking forward to the second half of the year, due to the large amount of MLF due from September to December, many experts predict that the subsequent MLF may continue to shrink and continue to do so in the current liquidity environment.

Pang Wei pointed out that there are still more than 2.5 trillion yuan of MLF due this year, so it is possible to continue to reduce the amount in the future, and the scale of the central bank’s reverse repurchase operation may still be cautious. Considering that the main force of monetary policy is to maintain reasonable and sufficient liquidity and steady and moderate growth of money and credit, and the key point is to promote the transformation from wide money to wide credit, the next step may be to adopt RRR reduction measures with lower capital cost, longer term and more convenient adjustment of bank capital structure.

Wen Bin believes that under the tone that the Fed’s rate hike has slowed down in the later period and the monetary policy is "I-oriented", the possibility of cutting interest rates again is not ruled out. The probability of RRR reduction in the third quarter is not high. However, if the real estate financing improves in the fourth quarter and the process of wide credit is accelerated, in order to provide long-term liquidity to the banking system and further reduce the debt cost, it is not excluded that a small RRR reduction of 0.25 percentage points will be carried out in due course.

Dong Ximiao said that next, monetary policy should be strengthened in many aspects, not only to maintain price stability, but also to promote economic growth, boost confidence and expectations, and better help economic and social recovery.

Original title: "Down by 15 basis points, the central bank just" cut interest rates "! 》