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recently, the people's bank of china has released a positive signal that there is still room for rrr cuts. industry experts said that the people's bank of china will continue to adhere to a supportive monetary policy and more effectively support high-quality economic development. in order to better maintain a reasonable abundance of liquidity and guide banks to enhance the stability and sustainability of loan growth, monetary policy may increase counter-cyclical adjustments, and a new rrr cut is expected to be implemented this year with a high probability.

there is room and necessity for rrr cuts

"the policy effect of the reserve requirement ratio cut at the beginning of the year is still continuing to manifest itself. currently, the average statutory reserve ratio of financial institutions is about 7%, and there is still some room," said zou lan, director of the monetary policy department of the people's bank of china, recently.

from the perspective of space, wang qing, chief macro analyst at orient securities, said that considering that some legal financial institutions that have implemented a 5% reserve requirement ratio did not cut the reserve requirement ratio in the previous few reserve requirement ratio cuts, this may mean that 5% is the lower limit of the current reserve requirement ratio, so there is still 2 percentage points of room for reserve requirement ratio cuts.

from the perspective of the domestic macroeconomic environment, the current manufacturing pmi, prices, and real estate are still shrinking, and monetary policy is urgently needed to implement more counter-cyclical adjustments. liu tao, a senior researcher at guangkai chief industry research institute, said that the growth of deposits and loans in my country's banking system is weak at the same time, and the bank's deposit-loan spread continues to narrow, which has caused obvious pressure on banks to operate stably and better serve the real economy.

wang yifeng, chief analyst of the financial industry at everbright securities, said that the central bank would timely reduce the reserve requirement ratio every six months or so to release medium- and long-term liquidity and "replenish" financial institutions. the last time the reserve requirement ratio was reduced was in early february this year. based on historical data, the window for reducing the reserve requirement ratio this year has been opened. in addition, the total amount of medium-term lending facilities (mlf) maturing from september to december is 4.28 trillion yuan, ushering in a peak in maturity. selecting an appropriate time to reduce the reserve requirement ratio can pre-hedge the impact of the mlf maturity to a certain extent, and at the same time help to dilute the color of the mlf medium-term policy interest rate.

strengthening the status of the benchmark interest rate for reverse repurchase

industry experts said that with the release of the signal of rrr cut, it is expected that another rrr cut will be implemented this year, and it may be implemented in the third quarter at the earliest. "considering the subsequent filling of the funding gap caused by the maturity of mlf, government bond issuance and credit supply, it is logically possible to cut the rrr again this year," said tan yiming, chief fixed income analyst at minsheng securities.

as for when the reserve requirement ratio cut will be implemented, liu tao said that a targeted reserve requirement ratio cut should be implemented as soon as possible in the third quarter for large and medium-sized banks to release liquidity to the market. wang qing believes that considering the current abundant liquidity in the banking system, the reserve requirement ratio cut is likely to be implemented in the fourth quarter, with a reduction of 0.5 percentage points, releasing 1 trillion yuan of funds, mainly to support the issuance of government bonds.

li yishuang, chief fixed income analyst at cinda securities, said that since the deposit growth rate has dropped significantly this year, the reserve requirement ratio cut in february is enough to cover the long-term liquidity consumption caused by the payment of the reserve requirement ratio by financial institutions. therefore, the central bank said that the policy effect of the reserve requirement ratio cut at the beginning of the year is still continuing to show. if the reserve requirement ratio cut is implemented, it is more likely to hedge against the maturity of mlf. considering that the amount of mlf matures in the fourth quarter, the probability of the reserve requirement ratio cut in the fourth quarter is higher.

in addition, huang weiping, chief fixed income analyst at industrial securities, said that if the central bank implements reserve requirement ratio cuts and treasury bond buying and selling operations in the future, it will most likely be accompanied by a reduction in the volume of mlf, thereby gradually diluting the policy interest rate color of the mlf interest rate and strengthening the status of the 7-day open market reverse repurchase operation rate as the benchmark interest rate.