The central bank lowered the RRR and cut interest rates officially, and the policy interest rate dropped the most in the past four years.
Release long-term liquidity of about one trillion yuan.
Yangcheng Evening News Reporter Dai Manman reports: The central bank lowered the RRR and cut interest rates officially! The People’s Bank of China announced on the 27th that it has decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage point from September 27th, 2024 (excluding financial institutions that have implemented the 5% deposit reserve ratio). After this reduction, the weighted average deposit reserve ratio of financial institutions is about 6.6%, which is expected to release about one trillion yuan of long-term liquidity. On the same day, official website, the central bank, issued an announcement on the open market business, reducing the operating interest rate of 7-day reverse repurchase in the open market by 0.2 percentage points, from the previous 1.70% to 1.50%.
According to the analysis, after Politburo meeting of the Chinese Communist Party pointed out on 26th that "the deposit reserve ratio should be reduced and the interest rate should be cut vigorously", the central bank simultaneously implemented the RRR cut and interest rate cut, which fully reflected the determination to increase the intensity of monetary policy regulation and control and strive to achieve the goal of economic and social development throughout the year with practical actions.
According to market analysis, the central bank once again announced the interest rate cut by adjusting the 7-day reverse repurchase operating rate in the open market, which further confirmed the reform direction of the central bank to improve the market-oriented interest rate regulation mechanism. The 7-day reverse repurchase operating rate has basically assumed the function of the main policy interest rate.
"This policy interest rate reduction is the largest in the past four years, which is an important embodiment of supportive monetary policy and will reduce the comprehensive financing cost of society through transmission." Dong Ximiao, chief researcher of Zhaolian, said that the policy interest rate was lowered by 20 basis points, which reflected the requirement of "strength". Under the market-oriented interest rate regulation mechanism, the benchmark interest rates in various markets will be lowered. It is expected that this policy interest rate reduction will also guide the deposit interest rate and the loan market quotation rate (LPR) to go down simultaneously, and keep the net interest margin of commercial banks stable. At the same time, interest rate cuts will promote the reduction of comprehensive financing costs of the real economy and support stable economic growth.
It is worth noting that the time when the central bank announced the RRR cut and interest rate cut before the market also triggered market discussion. Dong Ximiao believes that the announcement of interest rate cuts at 8: 00 a.m. is conducive to maintaining the continuity of policy intensity, further consolidating the consensus on high-quality development, laying a solid foundation for the continued stability of the capital market, and providing sufficient impetus for the healthy and upward development of the market.
The central bank said that it would stick to a supportive monetary policy stance, increase the intensity and accuracy of monetary policy regulation, and create a good monetary and financial environment for China’s stable economic growth and high-quality development.
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