In April, the LPR's "hold still" monetary policy will continue to be stable
2024-04-23
Recently, the People's Bank of China authorized the National Interbank Funding Center to announce that on April 22, the one-year LPR (Loan Market Quotation Rate) was 3.45%, and the LPR for loans over 5 years was 3.95%. The quotations for both varieties remain unchanged from the previous values. Several industry insiders believe that the unchanged LPR in April is in line with market expectations. The MLF (Medium Term Lending Facility) interest rate serves as the anchor interest rate for LPR quotations, and its changes will have a direct and effective impact on LPR. Therefore, when the People's Bank of China conducted MLF operations on April 15th, the unchanged operating interest rate indicated that the LPR in April would also remain unchanged. Wang Qing, Chief Macro Analyst of Dongfang Jincheng, told People's Daily that the year-on-year GDP growth rate in the first quarter reached 5.3%, indicating a continued upward trend in the macroeconomic recovery. This means that in the short term, it will be in a period of policy effectiveness observation, and the urgency to further guide the downward trend of LPR quotations will weaken. Wen Bin, Chief Economist of Minsheng Bank, told People's Daily that the LPR is likely to remain stable until policy interest rates are lowered, reserve requirements are lowered, or deposit interest rates are lowered, in order to "balance the health of the banking industry's balance sheet.". "The lower the policy interest rate and LPR, the better. It is more necessary to prevent potential arbitrage and idle risks, and improve the efficiency of policy implementation." Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, believes that it is expected that the subsequent monetary policy will continue to be stable, maintain reasonable and sufficient liquidity, strengthen cooperation with fiscal and other policies, promote the balanced allocation of credit resources, actively activate existing credit funds, balance the relationship between stable growth, stable prices, risk prevention, and promoting reform, and balance both internal and external factors. In addition, some industry insiders believe that the continuation of MLF's "parity reduction" in April significantly reduces the probability of LPR quotations being lowered this month. In addition, since the beginning of this year, loan interest rates have continued to decline significantly, putting pressure on bank net interest margin, and there is no room for further reduction in LPR quotes in the short term. The data recently released by the People's Bank of China shows that the interest rate for newly issued corporate loans in the first quarter was 3.75%, a year-on-year decrease of 0.22 percentage points; The interest rate for newly issued personal housing loans is 3.71%, a year-on-year decrease of 0.46 percentage points. Wen Bin believes that since the beginning of 2024, the intensification of deposit competition has been detrimental to the overall cost control of core deposits, and has further restricted the adjustment of LPR. At the same time, some credit interest rates are already low, and LPR quotations remain unchanged, aimed at preventing transfers and improving efficiency. In addition, at a press conference held by the State Council Information Office on March 21 this year, the relevant person in charge of the People's Bank of China said, "The decline in deposit costs and the shift in monetary policies of major economies are conducive to expanding the autonomy of interest rate policy operations." Wen Bin believes that this indicates that under the consideration of "balancing internal and external balance in price", policy interest rate cuts may need to meet several conditions: first, the Federal Reserve's interest rate reduction path is clear, and the pressure on RMB depreciation has been alleviated; Secondly, the deposit cost of commercial banks has achieved a downward trend; The third issue is that economic recovery and price recovery are still not optimistic, and further efforts from countercyclical policies are needed. (Lai Xin She)
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