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Our reporter Tan Zhijuan reports from Beijing

On July 22, the central bank issued an announcement stating that in order to optimize the open market operation mechanism, from now on, the 7-day open marketReverse repoThe operation was adjusted to fixed interest rate and quantity bidding. At the same time, in order to further strengthen counter-cyclical regulation and increase financial support for the real economy, the interest rate of the 7-day reverse repurchase operation in the open market was adjusted from the previous 1.80% to 1.70% from today.

On the same day, the People's Bank of China authorized the National Interbank Funding Center to announce that the loan market benchmark rate (LPR) on July 22 was: 1-year LPR was 3.35%, and LPR for more than 5 years was 3.85%, both down 10 basis points. This is the second mortgage rate cut brought about by the LPR adjustment this year. Previously, in February, the LPR quotation for more than 5 years was significantly reduced by 25 basis points, and the 1-year LPR remained unchanged.

In this regard, Yan Yuejin, research director of E-House Research Institute, told China Business News: "This interest rate cut comes at the time when the Third Plenary Session of the 20th CPC Central Committee was successfully held. In addition to the traditional role of reducing capital costs, supporting the real economy and playing a counter-cyclical regulatory role, it also creates a very good monetary and financial environment for China's new journey of modernization, and plays a positive role in enhancing the vitality of the subsequent real economy."

Zhou Maohua, a researcher at the Macro Market Department of China Everbright Bank, told reporters: "The series of actions taken by the central bank this time, on the one hand, released the release of increasing economic counter-cyclical regulation, increasing the implementation of monetary policy, reducing consumption and investment costs, and supporting economic recovery; on the other hand, deepening interest rate marketization reform and improving the market-based interest rate regulation mechanism."

The 7-day reverse repo rate cut has been implemented

The reporter noticed that since August last year, interest rates such as reverse repurchase and MLF have remained unchanged.

Regarding the reduction in the 7-day reverse repurchase rate, Wen Bin, chief economist of China Minsheng Bank, believes that this is aimed at strengthening counter-cyclical regulation and enhancing its policy interest rate attributes.

Wen Bin explained that considering the increasing pressure on the current domestic economic operation, my country'sGDPThe year-on-year growth rate was 4.7%, which was slower than that in the first quarter. In particular, the recovery of household consumption was relatively weak, and counter-cyclical measures needed to be strengthened. The central bank's decisive interest rate cut this time demonstrated the determination of monetary policy to protect the economic recovery, and was a positive response to the requirement of the Third Plenary Session of the 20th CPC Central Committee to "unswervingly achieve the annual economic and social development goals."

Wen Bin also said that under the overall consideration of "focusing on internal affairs and balancing internal and external affairs", the implementation of the 7-day reverse repurchase rate cut is expected to be gradually transmitted to the real economy through the financial market, promote the reduction of comprehensive financing costs, consolidate the economic recovery and positive trend, and break the negative cycle of downward long-term bond yields and weakening expectations.

The central bank issued an announcement stating that in order to optimize the open market operation mechanism, from now on, the open market 7-day reverse repurchase operation will be adjusted to a fixed rate and quantity bidding.

Wang Qing, chief macro analyst at Orient Securities, said this means there is no need to announce its interest rate level through reverse repurchase operations every day, which will help enhance its authority and further clarify its status as the main policy interest rate.

Wen Bin believes that "explicitly indicating the interest rate for open market operations and adjusting the bidding method will also help strengthen the policy attributes of the 7-day reverse repurchase rate. The open market bidding method includes price bidding and quantity bidding. The winning bid price of the former is determined by the game between supply and demand, which is theoretically uncertain, while the price of the latter is given.

"In the past, the central bank adopted price bidding for 7-day reverse repurchase operations in the open market. Although the winning bid rate remained unchanged most of the time, it was still necessary to conduct operations every day to release clear interest rate signals." Wen Bin pointed out, "Considering that the 7-day reverse repurchase operation rate in the open market has basically assumed the function of the main policy interest rate, in order to enhance the authority of the policy interest rate and effectively stabilize market expectations, it is necessary to optimize the bidding method to a fixed interest rate and quantity bidding, and to clearly indicate the operating interest rate. This is also a reflection of the improvement of the market-oriented interest rate regulation mechanism."

The “double reduction” of LPR helps reduce the cost of mortgage loans

The reporter noticed that this interest rate cut was a "double cut", that is, both the 1-year and 5-year LPRs were lowered.

In this regard, Yan Yuejin believes that this will have a positive effect on the use of funds in the short and medium term. In addition, the LPR adjustment, combined with the boost to the real economy and the guidance of expectations, will also help to further boost the financial market and play a positive role in better guiding subsequent expectations.

The reporter noticed that every time the interest rate was cut, the market paid more attention to the impact on the real estate market.

Yan Yuejin told reporters that the 5-year LPR rate cut will help further reduce mortgage costs. From the trend of LPR, it showed a trend of "breaking 4" in the first quarter of this year, that is, it dropped from 4.2% to 3.95%. The second rate cut this year has further guided the reduction of mortgage costs.

Yan Yuejin also calculated the current mainstream mortgage interest rates in various places, that is, the pricing formula of "LPR-75BP". In the past, the mainstream interest rate for the first home was 3.2%, but now it will drop to 3.1%. According to the loan principal of 1 million yuan and the repayment method of equal principal and interest for 30 years, the total mortgage interest will be reduced by nearly 20,000 yuan, and the monthly payment will be reduced by 55 yuan.

Therefore, in Yan Yuejin's view, if the effect of continuous interest rate cuts is superimposed, the effect of reducing monthly payments will be very obvious, which will help to combine with other policies to continuously reduce mortgage costs.

Regarding the reduction in the LPR quotation this time, Wen Bin believes that this may be due to the following multiple factors: First, it follows the reduction in the 7-day reverse repurchase rate and is gradually transmitted to the real economy through the financial market; second, under weak financing demand, it is necessary to balance the moderate expansion of quantity with a downward price; third, lower the interest rate on existing loans, ease the pressure of early mortgage repayment, and stabilize residents' credit; fourth, improve the quality of loan quotations, reduce deviations, and better reflect market supply and demand; fifth, stop "manual interest supplements" and other measures to drive improvements in bank liability costs, creating a certain space for the LPR reduction.

In terms of "manual interest subsidies", in order to prevent high-interest deposit-raising behaviors, maintain market competition order, and strive to stabilize liability costs, on April 8, the Market Interest Rate Pricing Self-Discipline Mechanism issued the "Initiative on Prohibiting High-Interest Deposit-raising through Manual Interest Subsidies to Maintain the Competitive Order of the Deposit Market", requiring all banks to complete rectification before the end of April.

Wang Qing said that in addition to the guiding role of policy-driven interest rate cuts, the current LPR price cuts were also supported by factors such as the regulators’ suspension of “manual interest supplements” since April, some banks’ reductions in deposit rates, and the recent market liquidity being reasonably abundant, against the backdrop of the bank’s net interest margin falling to a historical low. These factors all help reduce the various funding costs of banks and increase the motivation of quoting banks to reduce the LPR price markup.

Looking ahead, Wang Qing believes that the July LPR cut will drive corporate loan rates and residential mortgage rates down further in the third quarter. This will effectively reduce the financing costs of the real economy and expand domestic demand. At the same time, according to the deposit interest rate market-oriented adjustment mechanism, bank deposit rates must be linked to the 1-year LPR quote and the 10-year treasury bond yield, which means that a new round of bank deposit rates will be fully launched in the future. This will help stabilize the bank's net interest margin.

Wang Qing therefore predicted: "After the July reduction, the LPR quotation will remain stable in the short term. In the fourth quarter, depending on the economic and price conditions, the LPR quotation will still have room for a certain downward adjustment."

(Editor: Hao Cheng, Reviewer: Wu Kezhong, Proofreader: Yan Jingning)