According to the People's Bank of China, on July 15th, the central bank conducted a 129 billion yuan reverse repurchase operation through interest rate bidding, with an interest rate of 1.8%, unchanged from the previous period. In addition, a 100 billion yuan Medium Term Lending Facility (MLF) operation will be launched, with an interest rate of 2.5%, remaining unchanged. On the same day, 103 billion yuan of MLF expired, and this month we achieved reduced volume parity for continued operations. Experts say that the current liquidity is relatively abundant, and the necessity for the central bank to increase the volume of MLF has decreased. With the adjustment of the policy interest rate system, the policy interest rate color of MLF operating rates may fade. The funding situation is relatively loose. In July, MLF continued to operate at a reduced volume parity, achieving a small net withdrawal of 3 billion yuan in medium and long-term funds. The reason for this is that the market liquidity is relatively abundant. The continued reduction in MLF volume is due to the recent slowdown in the pace of bank credit allocation and the relatively abundant liquidity in the banking system. At the same time, commercial banks currently have lower financing costs in the money market, leading to a decrease in demand for MLF Wang Qing, Chief Macro Analyst of Dongfang Jincheng, said. Dong Ximiao, Chief Researcher of the China Merchants Association, believes that in situations where there is insufficient effective demand and government bond issuance is flat, the market liquidity is relatively abundant and the funding situation is relatively loose. Therefore, it is not necessary for the central bank to continue to increase the volume of MLF. Looking ahead, Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, predicts that the central bank will maintain reasonable and sufficient liquidity to support the implementation of proactive fiscal policies. At the same time, we will implement the previously introduced financial support policies and fully unleash their effects. The interest rate adjustment needs to take into account the MLF operating rate in July, which remains unchanged at 2.5% compared to the previous period. Experts believe that the current total money supply is relatively sufficient compared to market demand, and adjusting interest rates requires a comprehensive consideration of the pressure on bank net interest margins and internal and external balance. Dong Ximiao analyzed that from an internal perspective, the net interest margin of commercial banks in China fell to a historical low at the end of the first quarter, and there is significant pressure to push down the loan market quoted rate (LPR) by lowering the MLF operating rate; Meanwhile, excessively low policy interest rates may affect bond interest rates. From an external perspective, adjusting policy interest rates needs to consider the impact on the RMB exchange rate. It should be noted that some industry insiders believe that the policy interest rate color of MLF operating rates will fade in the future. In the future, with changes in the way the base currency is injected, the stock of MLF will gradually decrease, and its color as a medium-term policy interest rate will fade Wen Bin, Chief Economist of Minsheng Bank, stated that the central bank will focus on managing short-term interest rates and further streamline the transmission mechanism of various monetary policy tools from short-term to long-term interest rates. Wang Qing believes that while strengthening the main policy interest rate position of the 7-day reverse repo operation rate in the future, the policy interest rate color of the MLF operation rate will fade. (New Society)
Edit：Lubaikang Responsible editor：Chenze
Source：cs.com.cn
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