Central Bank Mobile Forum Delivers Effective Signals

In the people's Bank of China, the "forum on liquidity management before and after the Spring Festival" is held. Two points mentioned are interesting. First, the assistant governor Zhang Xiaohui put forward that "the choice of tools to supplement liquidity is not easy to implement."

It shows that everyone's desire for a near future has failed.

Judging from the rhythm of last year's fall, basically every two months will be reduced.

However, in December, it was not allowed to drop, causing many people's confusion.

Second, "from the first half of the month, we can see that the overall credit development is fast enough, and it has exceeded 1 trillion and 700 billion yuan. If this goes on," this is obviously warning commercial banks. Lending must be tempered this year, otherwise the central bank will have to tighten up the currency.

From the authoritative speech of January 4th this year, the reform has become the main keynote, so it can be concluded that monetary policy will not be more lenient than last year.

At present, the liquidity of the market is quite abundant, so at most, it is supplemented by some short-term liquidity management tools.

"We need to put about 1 trillion and 600 billion of the cash before the Spring Festival. We will follow the traditional practices over the years.

Through the open market reverse repurchase operation to meet, after the expiration of the cash withdrawal naturally hedge, for the second types of medium-term liquidity demand, the central bank intends to carry out MLF, SLF, PSL operation to provide 6000-8000 yuan of financial support.

In my view, after the second half of last year,

In fact, there is no problem of tight liquidity. Only because of abnormal fluctuations in the stock market, it leads to "abnormal" on monetary policy.

Today, the goal of RMB internationalization should be postponed, and monetary policy appears to be single, that is, to stabilize the exchange rate and maintain moderate liquidity.

Therefore, M2's target management will be strengthened again.

Staring at M2 growth rate to predict falling time is very reliable.

I remember that in March last year, I participated in the financial high level forum held in Taiwan, and predicted that April would be reduced.

The result is fulfilled.

I was able to predict the next few times.

As I wrote in the end of 4, looking at the timing of the central bank's drop in timing from the rise and fall of the broad money growth, I believe that the reduction in the amount of basic money caused by the decrease in foreign exchange reserves is the main reason for the central bank's behavior to guarantee the steady growth of broad money and loans.

From this, we can deduce the magnitude of the reduction from the rise and fall of M2.

It is estimated that there will be a reduction in interest rates and interest rates in the two quarter.

To achieve tangible results, we need other policy tools to cooperate. "

Then, how much M2 growth should be maintained is the magnitude needed to reduce the accuracy, which can be found in the government work report over the years.

For example, in last year's government work report, the M2 growth target was 12%, while in January the M2 growth rate dropped to 10.8%, and the central bank dropped 0.5% in February. Similarly, although the M2 growth rate rose to over 12% in February, it fell back to 11.6% in March.

The third reduction in June was due to the M2 growth of only 10.8% in May.

The two reduction in August and October was related to the stock market crash and the interest rate liberalization and interest rate reform of the central bank.

We can further explain the M2 growth figures corresponding to the previous month's corresponding drop in 2008 to date.

In September 2008, the central bank dropped its benchmark for the first time after 9 years. This is because the M2 growth rate in August 2008 dropped from 18% at the beginning of the year to 16%. Under the impact of the subprime crisis, the export surplus decreased significantly, and the decrease in foreign exchange growth led to a decrease in the base money. In September, the central bank adopted a reduction of 1% in the small and medium-sized financial institutions. However, in September and November, the growth rate of M2 dropped to 15.29% and 14.8% respectively, and the central bank reduced 0.5% and 1% respectively in October and November.

In December 2009, the M2 growth rate rose to 17.82%, and the Chinese economy began to rebound, and the central bank continued to raise the reserve ratio.

When China's economic growth has experienced two years of rebound and then down again, the M2 growth rate is down again, and the central bank will restart the mechanism.

In November 2011, the M2 growth rate dropped from 17% at the beginning of the year to 12.7%, and the central bank dropped 0.5% again in December.

In February 2012 and May, the central bank again dropped two times, corresponding to the previous month's M2 growth rate of 12.4% and 12.8% respectively, all of which were low points.

In 2011 and 2012, the M2 growth targets proposed in the government work report were 16% and 14% respectively.

Conversely, in the month when M2 grew faster than the target of the government's work report, the central bank has never taken any measures to reduce its accuracy.

For example, from May 2012 to the end of 2013, due to the M2 growth rate and the government work report

The growth target is relatively close, and the central bank has not lowered its standard.

The reform is dangerous. (2015)

In the 15 year, the central bank carried out five rate cuts, of which in October 24th it completely liberalized the upper limit of deposit interest rate.

It can be seen that the central bank has made great contributions in pushing forward the marketization of interest rates. It cleverly used the central government's request to solve the financing difficulties and financing problems. At the same time, by lowering interest rates and raising the rate of deposit interest rates, the marketization of nominal interest rates has been completed.

But the central bank has a big appetite. In addition to the basic success of the market-oriented interest rate reform (market interest rate stability), it also wants to further push forward the reform of exchange rate formation mechanism. Therefore, the two reduction in August and October is actually a bit of a violation of the Convention, that is, the growth rate of M2 exceeds 13%.

In this way, interest rates have been stabilized, but the expectation of devaluation has greatly increased.

Without considering capital market factors, the central bank should be able to cope with the currency shock brought by depreciation.

But it never occurred to me that the stock market fell so fiercely.

811 at the beginning of the reform, the stock market was lagging behind, which makes people wonder whether they are directly related to each other.

But this time, the causal relationship between the depreciation of the exchange rate and the stock market crash is very obvious.

And the international market has also fallen sharply.

After that, the problem of A shares will be discovered, that is, the phenomenon of high leverage and bubble that the central economic work conference has put forward in 14 years, or it has not attracted enough attention. (15, the central economic work conference did not mention again).

Facts have proved that today is indeed not a suitable window period for exchange rate reform and RMB internationalization.

What should I do? Step back.

To stabilize the exchange rate (not stability) and ensure that there is no systemic financial risk has become the focus of this year's financial work.

There is a remark on the liquidity Forum: "in October, it was better from the increase of the central bank's foreign exchange reserves, but it changed again in 11 and December.

A very important reason is that the double drop in October 24th has made the market liquidity very loose, which has increased the expectation of RMB exchange rate depreciation and the pressure of devaluation to a certain extent.

The meaning of this passage is the need to reflect on the "double down" in October. If it does not fall, the expectation of depreciation will not be so strong.

But was it intended to depreciate or not to depreciate? Because in January 4th, the central bank sharply lowered the middle price of the RMB exchange rate.

If it was discovered last year that liquidity was too loose after October, it would not be necessary to act on the exchange rate.

It can be seen that the central bank is committed to pushing forward the exchange rate reform and accelerating the internationalization of RMB. The exchange rate reform of 811 and the double fall of 1024 are logically consistent.

The sharp reduction of the middle price of exchange rate in January 4th can be regarded as a continuation of the 811 exchange rate reform policy.

Perhaps the central bank underestimated the huge impact of exchange rate fluctuations on the capital market.

Mundell's impossible triangle theory once again shows its power.

The exchange rate reform in August, the double fall in October, and the SDR accession in December, have tried to move the exchange rate again in the first 16 years.

Now that the trial and error method has proved that the timing of RMB internationalization is not yet ripe. Last year, the M2 growth rate was 13.1%, exceeding the target 1 percentage points. Therefore, it is expected that the central bank will still control the growth of M2 this year.

It is estimated that the M2 target set by the government work report will still be 12%, and the probability of reduction will be very small if not less than 12%.

The possibility of cutting interest rates is even smaller.

Of course, the Fed will also postpone raising interest rates, and it is estimated that it will be launched again in the second half of the year.