On December 20, the latest market quoted interest rate (LPR) for phase I loans was released. The people's Bank of China authorized the national interbank lending center to announce that the one-year LPR was 3.8%, a decrease of 5 basis points compared with the previous 3.85%, and the five-year LPR was 4.65%, unchanged. This is the first reduction of the one-year LPR this year and the first reduction after April 2020. Industry insiders said that since 2021, the people's Bank of China has strengthened cross cycle regulation, maintained reasonable and sufficient liquidity of the banking system, effectively reduced the capital cost of banks, promoted the decline of the one-year LPR, and the decline of LPR has also created favorable conditions for the financial system to transfer profits to the real economy. Looking forward to the future, monetary policy will further promote the decline of entity financing costs. At the same time, if the LPR remains unchanged for more than 5 years, it will release the signal of "no speculation in real estate" and maintain the virtuous circle and healthy development of the real estate industry. LPR is the benchmark interest rate of the loan market, which plays a directional and guiding role. The last LPR reduction can be traced back to April 2020. At the beginning of 2020, in order to help the enterprises affected by the epidemic tide over the difficulties, the regulatory authorities encouraged financial institutions to increase their support for the real economy and continuously guided the decline of LPR. On April 20, 2020, the one-year LPR will drop to 3.85%, and the five-year LPR will drop to 4.65%. Since then, the LPR quotation has not been adjusted. Liang Si, a researcher at the Bank of China Research Institute, said that the LPR reduction indicates that the counter cyclical regulation will be strengthened to better help the development of the real economy. Since the third quarter of this year, the downward pressure on the economy has increased, and the importance of stable growth in the short term has increased, which requires the strength of macro-control policies. The central economic work conference proposed that "cross cyclical and counter cyclical macro-control policies should be organically combined" and "prudent monetary policy should be flexible and appropriate". The LPR reduction will help guide financial institutions to continue to reduce loan interest rates, further reduce enterprise financing costs, and help enterprises operate steadily and accelerate recovery. Lu Zhengwei, chief economist of Industrial Bank, said that considering that China's financing mode is mainly bank loans, and LPR has become the reference benchmark for bank loan pricing, the reduction of LPR can directly drive the reduction of new loan interest rate, and the interest rate of stock loans to be repriced next year will also decline simultaneously, which can provide a favorable environment for the financial system to transfer profits to the real economy, Support high-quality economic development. The LPR cut is in line with market expectations. Zhang Xu, chief fixed income analyst at Everbright Securities, said, LPR is composed of MLF (medium term loan facility) interest rate and the increase range, which mainly depends on the capital cost, market supply and demand, risk premium and other factors of each quotation bank. "At present, the MLF interest rate remains unchanged, but the two standard cuts in July and December this year have directly saved the capital cost of about 28 billion yuan per year. The adjustment of deposit interest rate pricing mechanism and the pressure drop of structural deposit scale also promote the decline of bank debt cost, which have formed a strong thrust on the decline of LPR." Zhang Xu said. Political Commissar Lu also said that the LPR reduction is a comprehensive reflection of the flexibility and moderation of the central bank's monetary policy and the reasonable and abundant liquidity of the banking system, and also fully reflects the market-oriented characteristics of the LPR quotation formation mechanism. It is worth noting that the LPR down regulation shows the characteristics of "asymmetry", that is, it decreases in 1-year period and remains unchanged in more than 5-year period. Dong ximiao, chief researcher of Zhaolian finance, said that this is mainly to promote the decline of medium and short-term loan interest rates, reduce the financing costs of the real economy and do not send a loose signal to the real estate market. This also shows that the prudent orientation of monetary policy has not changed. In the next step, we will make monetary policy more flexible and appropriate through fine-tuning and pre adjustment. Wen bin, chief researcher of China Minsheng Bank, said that keeping the LPR unchanged for more than five years will help maintain the virtuous circle and healthy development of the real estate industry. The bank implemented the policy requirements for the regulation of the real estate market and recently began to increase credit support to meet the reasonable demand for development loans and support the commercial housing market to better meet the reasonable housing demand of buyers. The scale of relevant credit improved significantly. The individual housing loans increased by 348.1 billion yuan and 401.3 billion yuan respectively in October and November, An increase of 101.3 billion yuan and 53.2 billion yuan respectively over the previous month. Under the condition that the relevant credit demand is gradually reasonably met, the LPR over 5 years remains unchanged, which helps to maintain the virtuous circle and healthy development of the real estate market. Xu Xiaole, chief market analyst of Shell Research Institute, said that the five-year LPR as the benchmark anchor of mortgage interest rate remained unchanged, which means stabilizing the real estate market from the macro level. In December, the interest rates of the first house loan and the second house loan in 103 mainstream cities monitored by the shell Research Institute were 5.64% and 5.91%, all 5 basis points lower than those in November. The mortgage interest rate decreased month on month for three consecutive months, the lending cycle was shortened to less than two months, and the mortgage environment remained improved. Looking forward to the future, Liang Si said that reserve requirements and interest rates have been reduced continuously this month. At the same time, the Ministry of finance has issued the quota of special bonds approved in advance in 2022 to the provincial financial departments. The counter cyclical adjustment of macro policies has begun to exert full force, and may continue to increase in the future. Political Commissar Lu said that there is still room for decline in LPR in the future. The central economic work conference called for strengthening and improving macro-control, increasing the cross cyclical regulation of macro policies, and improving the forward-looking pertinence of macro-control. It is expected that the people's Bank of China will continue to maintain a reasonable and sufficient liquidity, guide the downward trend of LPR, continue to play the guiding role of LPR, promote the further reduction of enterprise financing costs and maintain the economic operation within a reasonable range. (outlook new era)