Deposit Rate Further Lowered, Guiding Market Interest Rates To Run Smoothly.

After nearly three months,

Tools are used again.

On the evening of May 12th, the central bank announced that the deposit reserve ratio of deposit financial institutions should be reduced by 0.5 percentage points from May 18, 2012.

This is the second time the central bank has lowered the reserve requirement this year.

The move is expected to release about 400000000000 yuan liquidity, which is undoubtedly a good thing for stabilizing economic growth and boosting confidence in the stock market.

In the next stage, the central bank will continue to flexibly apply all kinds of quantitative tools to regulate the liquidity of the banking system.

After this reduction, large scale

The deposit reserve ratio dropped to 20%, and the deposit reserve ratio of small and medium-sized financial institutions dropped to 16.5%.

The central bank chose to lower the reserve requirement shortly after its economic data was released in April. For this time point, the chief economist of the bank, Lian Ping, said that data on imports and exports, industrial added value, investment, currency and credit released on the 11 day showed that the growth of the economy was not optimistic. The central bank lowered its deposit rate first, in response to the obvious downward trend of the current economy.

Peng Wensheng, chief economist of CICC, also said that the growth rate of money and credit in April has dropped markedly, reflecting the weakening of aggregate demand. The over expected slowdown in the growth of macroeconomic activities such as industrial added value has increased the pressure of active monetary policy adjustment; inflation pressure has dropped in April, and the downward trend of inflation has also provided greater room for the counter cyclical operation of monetary policy.

This reduction in the expected market rate is also conducive to increasing market liquidity and stabilizing economic growth.

Zhao Qingming, an international financial expert, pointed out that the further easing of monetary policy was an indication of the central bank's response to the current slowdown in macroeconomic indicators.

This will help to improve market expectations and enhance the ability of banks to lend.

Lian Ping believes that reducing the deposit rate will help improve the financing environment of enterprises, reduce the cost of financing and promote the expansion of investment by further increasing liquidity. It will help the financial markets of the stock market in the future to become more active, and help to maintain a reasonable level of liquidity in the second half of the year.

For the next step

The market expects that the central bank will continue to optimize liquidity management, take into account foreign exchange inflows, market demand changes and short-term special factors, and use various liquidity management tools such as reverse repo, repo, central bank bills and deposit reserve ratio to flexibly adjust the liquidity of the banking system and guide the steady operation of market interest rates.

But there are also voices saying that in the current economic situation, the use of price instruments is of greater significance.

Zhao Qingming believes that in the current situation of investment reduction and enterprise orders reduction, the effective credit demand of the whole society is decreasing. Even if it is not reduced, the current liquidity state does not constitute an obstacle to credit growth.

So he thought the interest rate cut was even more significant.

Peng Wensheng, chief economist of CICC, also believes that in April, macroeconomic data showed that there was no impetus for economic growth, and the possibility of lowering the benchmark interest rate in the next few months has picked up.