Directional Interest Rate Reduction Or Economic Normality

Since 2011, the central bank's monetary policy has shifted from interest rate to broad money supply (M2), that is to maintain the steady growth of broad money supply. However, taking the M2 growth rate as the intermediate goal of monetary policy means that the central bank must sacrifice the stability of interest rates. In this case, we can observe that since the M2 growth rate has been stable since 2011, market interest rates have been rising and volatility has increased. The rising interest rate prices will inevitably increase the borrowing costs of enterprises, affect the enterprises' anticipation of future economic growth, and thus reduce the willingness of enterprises to invest. The increase of interest rate volatility will affect the stability of financial markets and cause financial panic. On the whole, there are two problems in the interest rate market, such as high price and high volatility, which indirectly affect the economic growth by affecting the real economy and financial market. To enhance the stability of interest rates and guide the decline in capital prices, the central bank used SLO and SLF tools to stabilize short-term interbank market interest rates in the financial market, guided interim interest rates with PSL, and helped the real economy through refinancing and targeted reduction.

However, from the present point of view, the use of these tools does not play an effective role in supporting the development of the real economy, nor can it prevent the economic downturn. From the data point of view, the scale of new loans and social financing increased after June. In July, both fell sharply: RMB loans increased by less than 314 billion 500 million yuan a year, while the scale of social financing decreased by 1 trillion and 690 billion yuan compared with June. Reflecting the economic indicators, the latest HSBC August manufacturing PMI shows that the economic boom is still in the doldrums.

In fact, for the real economy, the most important variable is the price of funds. The central bank's current measures can not effectively reduce the price of market funds. This is not seen from the lowering of the loan base interest rate (LPR). At the same time, the loan interest rate data published in the semi annual reports of China's listed banks also confirm the invalidity of the current policy of the central bank.

This phenomenon is not an accident. In the case of the central bank's strong control over the growth rate of M2, the partial structural relaxation is still equal to the overall tightening due to the linear duality between price and quantity. In general, if the central bank wants to lower market interest rates, it should give up control of M2 growth. However, at present, the central bank has to control the total amount of money in order to prevent loosened currencies from entering overcapacity industries, local government platforms and real estate industries. After all, as far as the market environment is concerned, the local government has not yet standardized its debt issuance, and there are still soft constraints in the budget. Overcapacity industries are "struggling" to survive because of the needs of local employment protection. Under the condition of high inflation memory, people's willingness to buy houses is still high. Any central bank's policy of universal benefit will lead to the runaway of capital flows and the reversal of market expectations, thereby delaying the economy. Transformation Process.

However, any monetary instrument is a total quantity tool. It hopes to use monetary instruments to curb the black hole of the three funds flowing to the above funds, resulting in the tight market funds. interest rate Rise. The higher interest rate is forcing the overcapacity industry to withdraw from the market gradually, the local government platform stops financing, and the real estate industry shrinks. At the same time, it will inevitably kill other normal manufacturing enterprises, especially some small and medium-sized enterprises which are relatively small but are in line with the direction of China's future industrial transformation.

Based on the above reasons, The State Council Ten new financial nations are proposed, hoping to reduce the cost of social financing in various ways. I believe that under the guidance of this conference, the central bank is implementing structural quantitative tools at the same time, supplemented by price guidance, including reducing the repo rate to 3.7%, and the interest rate of the support agriculture reloan rate is reduced by 1 percentage points on the basis of the preferential interest rate. However, just as structural quantitative tools can not solve the structural problems existing in the economy due to their aggregate attributes, the effectiveness of structural price tools remains to be seen. After all, the market is interrelated, and the two prices appearing in the same market will eventually disappear under risk-free arbitrage.

However, even if there are such problems, the central bank is still the second best choice for the central bank. It can be envisaged that in the next period of time, a comprehensive "quasi cut interest rate" is still difficult to enter the central bank's toolbox. Directional interest rate cuts or become one of the central bank's main structural monetary policy tools, and even if the future economic downturn further, then multiple and wide range of directional interest rates will replace the overall interest rate reduction, with a view to stabilizing the economy without changing market expectations, and supporting structural transformation of the economy.