(Source: 21st Century Economic Report 2024-07-20)
On July 19, Pan Gongsheng, Secretary of the Party Committee and Governor of the People's Bank of China, presided over a party committee meeting to convey and study the spirit of the Third Plenary Session of the 20th CPC Central Committee and study and deploy implementation measures.
The meeting emphasized that based on the primary task of serving high-quality development, we should accelerate the improvement of the modern monetary policy framework with Chinese characteristics. We will always maintain the soundness of monetary policy, enrich the monetary policy toolbox, improve the monetary policy transmission mechanism, improve the efficiency of fund use, and create a good monetary and financial environment for continued economic recovery and high-quality development.
The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed to "improve the macroeconomic governance system", of which the modern central bank system is an important part, and the modern monetary policy framework is an important part of the modern central bank system.
Associate Professor Jiang Tingfeng, China w88 casino of Finance, w88 casino(Author of the textbook "Modern Money and Banking") said in an exclusive interview with a reporter from the 21st Century Business Herald that the transformation of my country's monetary policy framework to a price-based one marks the transformation of my country's monetary policy into a more w88 online casino betting-oriented, flexible and forward-looking price-based regulation. This is a key step towards a modern monetary policy framework. The price-based monetary policy framework can more effectively guide the flow of financial resources, reduce financing costs, and improve the efficiency of financial services for the real economy through changes in price signals such as interest rates.
Jiang TingfengIt also explained the hotly discussed new monetary policy tools in the w88 online casino betting - the purchase and sale of government bonds in the secondary w88 online casino betting and temporary forward and reverse repurchase operations. In her view, the purchase and sale of government bonds in the secondary w88 online casino betting is expected to replace the MLF as the medium-term base currency, and the MLF may withdraw when the operation scale is large. As for whether the interest rate corridor that is controversial in the w88 online casino betting has narrowed, she bluntly said that the temporary overnight forward and reverse repurchase operation range is quite different from the operating logic of the interest rate corridor. At present, it is more accurate to define it as a day-time liquidity management tool.
The central bank especially needs to strengthen communication with the w88 online casino betting during the transformation period
"21st Century": What does it mean to transform the monetary policy framework to a price-based one? What precautions should be taken during the transformation process?
Jiang Tingfeng:The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed that “the role of the w88 online casino betting mechanism must be better brought into play.” The transformation of the monetary policy framework to a price-based one will help to better bring into play the role of the w88 online casino betting and improve the transmission efficiency of monetary policy. Price-based regulation emphasizes the decisive role of the w88 online casino betting in the allocation of financial resources, guides the flow of funds through interest rate changes, promotes the effective allocation of funds, and strengthens w88 online casino betting discipline and risk pricing mechanisms. This mechanism helps to form a more sensitive w88 online casino betting response, enables monetary policy to be transmitted to all levels of the economy more quickly, improves the timeliness of regulation, and thereby improves the transmission efficiency of monetary policy.
The Plenary Session proposed to "deepen the reform of the financial system", and the 2023 Central Financial Work Conference proposed to "optimize the financing structure and better exert the hub function of the capital w88 online casino betting." The price-based monetary policy framework can more effectively guide the flow of financial resources, reduce financing costs, and improve the efficiency of financial services to the real economy through changes in price signals such as interest rates; enhance the depth and breadth of the financial w88 online casino betting, enhance the role of the capital w88 online casino betting in resource allocation, and further exert its function of serving the real economy. This transformation will help optimize the allocation of financial resources through diversified financing methods, support innovation-driven and structural upgrading, and thereby promote high-quality economic development.
During the transformation process, the central bank should further improve the w88 online casino betting-oriented interest rate control mechanism, reduce w88 online casino betting segmentation, and improve the price-based monetary policy toolbox. The prerequisite for the interest rate mechanism to fully function is that there is no w88 online casino betting segmentation (that is, the short-term, medium-term and long-term markets can interact with each other), and the transmission of interest rates from the short-term to the medium-to-long term must be smooth. The central bank needs to continuously improve the price-based monetary policy toolbox, continue to deepen the w88 online casino betting-oriented reform of interest rates, promote short-term policy interest rates to guide the operation of money w88 online casino betting interest rates, and ultimately effectively transmit them to bond, loan and deposit interest rates, thereby achieving the goals of monetary policy regulation.
At the same time, the central bank should also pay attention to strengthening policy communication and enhancing policy transparency. The monetary policy transformation process involves different types of policy interest rates, operational targets and intermediary targets (including quantity and price), which may cause the w88 online casino betting to misunderstand policy signals. Therefore, during the transition period, the central bank especially needs to strengthen communication with the w88 online casino betting to ensure that w88 online casino betting participants can accurately understand the direction and intention of monetary policy, thereby reducing w88 online casino betting uncertainty and enhancing w88 online casino betting confidence in the central bank.
In addition, monetary policy and fiscal policy must be coordinated. The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed the need to "coordinate and promote reforms in key areas such as finance, taxation, and finance, and enhance the consistency of macro policy orientations." Considering that increasing the issuance of government bonds will still be an important fiscal policy tool for my country in the future, the transformation of the monetary policy framework must take into account the orientation of fiscal policy and give full play to the role of the central bank in improving the liquidity of the government bond w88 online casino betting, thereby forming a more complete government bond yield curve. This is not only conducive to the implementation of price-based monetary policy, but also promotes stable macroeconomic growth and the healthy development of financial markets.
The temporary overnight forward and reverse repurchase operation range is not a new interest rate corridor
"21st Century": In your opinion, what are the central bank's considerations in including the trading of secondary w88 online casino betting government bonds in the monetary policy toolbox?
Jiang Tingfeng:The central bank of my country has included the trading of government bonds in the secondary w88 online casino betting into the monetary policy toolbox in order to increase the central bank's investment channels and regulatory initiative for base money and enrich the central bank's liquidity management tools, rather than quantitative easing policy. The central bank is an important participant in the secondary w88 online casino betting for government bonds, but currently the proportion of Chinese bonds in the central bank's assets is still less than 5%, which also means that the central bank's influence on the government bond w88 online casino betting is relatively small. By comparison, the proportion of Chinese bonds in the central bank assets of other major economies in the world is usually more than 50%. The central bank's inclusion of secondary w88 online casino betting government bond trading in the monetary policy toolbox can increase the liquidity of the government bond w88 online casino betting, help improve the government bond yield curve, and provide benchmark interest rates for other bond markets. It is also conducive to optimizing the interest rate transmission mechanism and enhancing the synergy between monetary policy and fiscal policy.
"21st Century": The central bank recently created overnight temporary forward and reverse repurchase operations. The operating interest rates are respectively 20bp minus and 50bp plus the 7-day reverse repurchase operation interest rate. Some people believe that this is the establishment of a new interest rate corridor. What do you think of this?
Jiang Tingfeng:In July 2024, the 7-day reverse repurchase interest rate is 1.8%. The interest rates for temporary overnight forward and reverse repurchase operations are 20bp minus and 50bp plus the 7-day reverse repurchase operation interest rate, respectively. The corresponding interest rates are 1.60% and 2.30% respectively. The central bank created this tool to explore the appropriate narrowing of the width of the interest rate corridor, enhance the central bank's ability to control short-term w88 online casino betting benchmark interest rates, send clearer interest rate control target signals to the w88 online casino betting, and improve the accuracy and effectiveness of open w88 online casino betting operations. However, 1.60% and 2.30% cannot yet be regarded as the lower and upper limits of the new interest rate corridor.
To understand this, we must first understand the composition of my country’s current interest rate corridor model. The so-called interest rate corridor refers to the central bank using the deposit and loan facility mechanism provided to commercial banks and other financial institutions to set an interest rate operation, thereby stabilizing w88 online casino betting interest rates and inter-bank system liquidity. In my country's practice, the upper limit of the interest rate corridor is the 7-day Standing Lending Facility (SLF) interest rate, and the lower limit is the excess deposit reserve interest rate. The difference between the two is also called the width of the interest rate corridor. Ideally, w88 online casino betting interest rates should fluctuate between the two. That is, by constructing an interest rate corridor, the central bank can limit short-term w88 online casino betting interest rates such as interbank interest rates within the corridor.
The logic is that when the interbank w88 online casino betting has sufficient liquidity and the funding interest rate is lower than the lower limit of the interest rate corridor, commercial banks choose to deposit surplus funds into the central bank, causing the funding interest rate to gradually rise above the lower limit of the interest rate corridor; conversely, when the funding interest rate is higher than the upper limit of the interest rate corridor, commercial banks choose to borrow funds from the central bank, causing the funding interest rate to gradually decrease.
In July 2024, the interest rate on the 7-day Standing Lending Facility (SLF007) was 2.80%, the interest rate on excess deposit reserves was 0.35%, and the width of the interest rate corridor was 245bp, far exceeding the interest rate corridor width of many developed countries (25-50bp). However, the interest rate corridor is too wide, making it difficult for the central bank to effectively regulate and stabilize short-term w88 online casino betting benchmark interest rates.
The temporary overnight forward and reverse repurchase operations cannot be regarded as a new interest rate corridor, but can only be regarded as the central bank's exploration of moderately narrowing the width of the interest rate corridor, which needs to be further improved in the future. The reason is that according to the statement that "the People's Bank of China will carry out temporary forward repurchase or temporary reverse repurchase operations as appropriate, with an overnight term, fixed interest rates, and quantity bidding," this tool is initiated by the central bank, rather than actively applied by financial institutions based on their own liquidity needs; it is temporary, not permanent, and the quantity is limited, which is quite different from the operational logic of the interest rate corridor.
To be more precise, temporary overnight forward and reverse repurchase operations help enhance the central bank's liquidity management capabilities, stabilize w88 online casino betting expectations, and reduce the volatility of short-term w88 online casino betting interest rates. When inter-bank liquidity is tight and DR007 has greater upward pressure, the central bank carries out overnight temporary reverse repurchase operations at an interest rate of 50bp plus the 7-day reverse repurchase operation rate, which helps control the short-term w88 online casino betting benchmark interest rate from rising too high, which can cause greater liquidity panic; and when inter-bank liquidity is loose, the overnight temporary positive repurchase operation interest rate is 20bp from the 7-day reverse repurchase operation rate, which helps to control the short-term w88 online casino betting benchmark interest rate from falling too much and inhibit the idling of funds.
MLF may withdraw when the scale of government bond trading in the secondary w88 online casino betting is large
"21st Century": How to understand what Pan Gongsheng said about "further consolidating the 7-day reverse repurchase operation interest rate as the main policy interest rate"?
Jiang Tingfeng:This move is to better promote the marketization of my country's interest rates and the transformation of the monetary policy framework into a price-based one. It aims to influence the short-term w88 online casino betting benchmark interest rates through the central bank's short-term policy interest rates and transmit them to medium and long-term interest rates through w88 online casino betting effects.
The current policy interest rate system of my country's central bank is: the 7-day reverse repurchase rate in open w88 online casino betting operations is the short-term policy rate, and the medium-term lending facility (MLF) interest rate is the medium-term policy rate. The former, combined with the interest rate corridor mechanism, jointly affects the short-term w88 online casino betting benchmark interest rate DR007, which in turn affects various money w88 online casino betting interest rates; the latter mainly affects the loan w88 online casino betting benchmark interest rate (LPR), which in turn affects credit w88 online casino betting interest rates.
In lay terms, in the w88 online casino betting-oriented interest rate system and within the framework of price-based monetary policy, the central bank should manage the interest rates (short-term) that it manages, send clear signals to the w88 online casino betting, and leave other interest rates to the w88 online casino betting to decide.
First, the "interest rate of the management" is generally the short-term interest rate rather than the medium- and long-term interest rates. The central bank further consolidates the 7-day reverse repurchase operation interest rate as the main policy interest rate and weakens the role of the medium-term policy interest rate MLF interest rate. It aims to influence the short-term w88 online casino betting benchmark interest rate through the central bank's short-term policy interest rate and transmit it to the mid- and long-term interest rates through w88 online casino betting action. It is to make the central bank's monetary policy signal clearer, and multiple central bank policy rates can easily cause the w88 online casino betting to misunderstand the monetary policy signal.
Second, "good management" means that the central bank strengthens its ability to regulate the "interest rates that should be managed." As mentioned above, the central bank is exploring further narrowing the width of the interest rate corridor in order to enhance the central bank's ability to regulate short-term w88 online casino betting benchmark interest rates, guide short-term w88 online casino betting benchmark interest rates to operate around short-term policy rates, and send clearer monetary policy signals to the w88 online casino betting.
"21st Century": If we want to "dilute the color of MLF's policy interest rate", will MLF withdraw from the stage of history? What changes will happen to the LPR that has been linked to MLF for a long time?
Jiang Tingfeng:In the future, the central bank should downplay the role of MLF. When the time is right, the MLF interest rate may indeed be withdrawn; and the LPR quotation will gradually be decoupled from the MLF interest rate, thus more truly reflecting the bank's actual loan interest rate for the most favorable customers.
On the one hand, from the perspective of the role of base currency release channel, since its establishment in September 2014, MLF has assumed the role of the central bank in providing medium-term base currency to commercial banks and policy banks that meet macro-prudential management requirements. Financial institutions need to provide high-quality bonds such as treasury bonds, central bank bills, policy financial bonds, and high-grade credit bonds as qualified collateral.
The inclusion of the purchase and sale of treasury bonds in the secondary w88 online casino betting into the monetary policy toolbox can enhance the central bank's initiative in regulating medium- and long-term base money, which has important policy significance. In the long run, this monetary policy tool is expected to replace the MLF as the medium-term base currency, so the role of the MLF's base currency release channel will be further weakened. When the central bank's secondary w88 online casino betting treasury bond buying and selling becomes larger, MLF may withdraw.
On the other hand, the central bank has made it clear that "it will further consolidate the 7-day reverse repurchase operation interest rate as the main policy interest rate in the future", which also means that the importance of the MLF interest rate as the policy interest rate will inevitably gradually decrease. In addition, as the role of MLF in the base currency injection channel weakens, the role of its medium-term policy interest rate will also weaken, and the LPR quotation will gradually decouple from the MLF interest rate and become more w88 online casino betting-oriented.
In April 2022, the central bank guided the interest rate self-discipline mechanism to establish a w88 online casino betting-based adjustment mechanism for deposit interest rates. With the formation of the "LPR+treasury bond yield → deposit interest rate" transmission mechanism, the restrictions on bank loan interest rate adjustments caused by net interest margin pressure will also be reduced, and there will be greater room for w88 online casino betting-based adjustment of loan interest rates.
With the strengthening of the role of short-term policy interest rates and the enhancement of the central bank's ability to control the short-term w88 online casino betting benchmark interest rate DR007, the transmission effect of short-term w88 online casino betting interest rates on LPR will also be enhanced. The transmission mechanism of "w88 online casino betting interest rate + central bank guidance → LPR → loan interest rate" is also expected to be formed. LPR will be more w88 online casino betting-oriented and can more truly reflect the level of loan w88 online casino betting interest rates.
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