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the second reduction in the deposit reserve ratio and the 7-day reverse repurchase rate this year was implemented on the same day!

according to the central bank announcement, starting from september 27, the interest rate for 7-day reverse repurchase operations in the open market will be adjusted from the previous 1.70% to 1.50%. the operating interest rates for the 14-day reverse repurchase and temporary forward and reverse repurchase operations in the open market will continue to be determined by adding or subtracting points to the 7-day reverse repurchase operating interest rate in the open market, and the range of additions and subtractions will remain unchanged. this is the second interest rate cut on the 7-day reverse repo since july 22.

at the same time, the central bank's official website also issued an announcement at 8 a.m. that day, stating that starting from that day, it would lower the deposit reserve ratio of financial institutions 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 will be approximately 6.6%.

the central bank stated that it will adhere to a supportive monetary policy stance, increase the intensity of monetary policy control, improve the accuracy of monetary policy control, and create a good monetary and financial environment for china's stable economic growth and high-quality development.

this is the second rrr cut this year and is expected to release about 1 trillion yuan in long-term liquidity. the first rrr cut this year occurred in february.

according to many interviewees, the rapid implementation of this rrr cut and interest rate cut is a concrete implementation of the deployment of the political bureau meeting of the cpc central committee on september 26 to "reduce the deposit reserve ratio and implement a strong interest rate cut." it is also in line with the september 26 decision. the policies stated by the central bank at the state council information office press conference on march 24 are highly consistent.

cut interest rates by 0.2 percentage points

the 7-day reverse repurchase is also the second interest rate cut this year.

the central bank stated that the interest rate for the 7-day reverse repurchase operation in the open market was adjusted to 1.50% from the previous 1.70% in order to increase the countercyclical adjustment of monetary policy and support stable economic growth.

however, the central bank pointed out that the operating interest rates for the 14-day reverse repurchase and temporary forward and reverse repurchases in the open market will continue to be determined by the addition or subtraction points of the 7-day reverse repurchase operation interest rate in the open market, and the range of additions and subtractions will remain unchanged.

"the reduction of the main policy interest rate by 0.2 percentage points is a 'powerful' interest rate cut, and the single rate cut is the largest since 2021." wang qing said frankly that after this policy interest rate cut, it will drive various market-based interest rates to fall even more. .

dong ximiao, chief researcher of china merchants union, also said in an interview with a reporter from china times that the 7-day reverse repurchase operation interest rate is the main policy interest rate, and it is expected that lpr will fall by 20 basis points simultaneously, thereby promoting a significant decline in existing and new loan interest rates.

"if we operate based on a 20 basis point interest rate cut, we can basically judge that the lpr may be lowered by 20 basis points on october 21." yan yuejin, deputy director of shanghai eju real estate research institute, told a reporter from china times, especially in combination with " the policy of "stopping the decline and stabilizing" will have a greater impact on boosting housing consumption, especially in first-tier cities.

based on this calculation from the cost of housing loans, for a mortgage loan model with a loan principal of 1 million yuan and equal principal and interest for 30 years, for every 20 basis points of lpr decrease, the monthly payment can be reduced by about 120 yuan, further reducing the cost of home purchase.

"it can be seen that the medium-term lending facility interest rate (mlf operating interest rate) has been reduced by 0.3 percentage points on september 25. it is estimated that the average reduction in corporate and residential loan interest rates will also reach or even exceed 0.2 to 0.25 percentage points. among them, newly issued residential mortgage interest rates will fall even further. this is the key to promoting the stabilization of the real estate market," wang qing further said.

for the market, "the central bank cooperates with rrr cuts and interest rates to reasonably release liquidity and guide the market interest rate center to move downward, which will help guidereal economythe decline in financing costs stimulates consumption and investment activities; at the same time, the downward movement of the market interest rate center helps reduce bank financing costs, expand bank profits to the real economy, and maintain the overall stability of bank net interest margins. zhou maohua, a macro researcher at the financial markets department of everbright bank, analyzed that as the central bank actively promotes the transmission of policies to the real economy, the subsequent slf (7-day period) will also be lowered.

rrr cut by 0.5 percentage points

the market is not surprised by this rrr cut.

previously, at the press conference of the state council information office on september 24, pan gongsheng, governor of the people's bank of china, announced that the deposit reserve ratio would be lowered by 0.5 percentage points in the near future to provide long-term liquidity of approximately 1 trillion yuan to the financial market. at the same time, the central bank's policy interest rate, that is, the 7-day reverse repurchase operation interest rate, was reduced by 0.2 percentage points, from the current 1.7% to 1.5%.

the meeting held by the political bureau of the cpc central committee on september 26 also emphasized the need to reduce the deposit reserve ratio and implement a strong interest rate cut.

based on this calculation, the two reserve requirement ratio cuts during the year reduced the deposit reserve ratio of financial institutions by a total of 1 percentage point, which will provide a total of about 2 trillion yuan of long-term liquidity to the market.

"as far as this rrr cut is concerned, there are two direct effects." wang qing, chief analyst of oriental jincheng, told the china times reporter that currently at the peak period of government bond issuance, the central bank's rrr cut can allow banks to spend more funds are used to purchase government bonds to support the smooth issuance of government bonds, and the funds raised from government bonds will be used to expand investment and promote consumption. the current focus is to support large-scale equipment updates, trade-in of durable consumer goods, etc.; on the other hand, rrr cuts can directly support the four quarterly bank lending.

wang qing judged that banks will increase credit lending in the fourth quarter, which will reverse the large year-on-year decrease in new rmb loans from january to august and is also an important driver of current economic growth momentum.

however, a reporter from china times learned that after the implementation of this rrr reduction policy, the deposit reserve ratio of large banks will be reduced to 8%, and that of medium-sized banks will be reduced to 6%. rural financial institutions still implement a deposit reserve ratio of 5% and are not included in this adjustment.

it should be pointed out that on september 24, pan gongsheng also announced that depending on the market liquidity situation, it may choose an opportunity to further lower the deposit reserve ratio by 0.25-0.5 percentage points during the year.

wang qing analyzed that this means that another rrr cut may be implemented before the end of the year, exceeding market expectations.

"we estimate that this may be mainly to support the increase in national debt issuance and reflect the coordination between macro policies. this shows that in the future, macro policies, including monetary policy and fiscal policy, will fully exert their efforts in the direction of stabilizing growth." wang qing added.

editor-in-chief: meng junlian editor-in-chief: zhang zhiwei