SMM News: on January 4, the official website of the people's Bank of China announced that in order to further support the development of the real economy, optimize the liquidity structure, and reduce financing costs, The people's Bank of China has decided to cut the reserve requirement ratio for financial institutions by 1 percentage point, including 0.5 percentage points on January 15 and January 25, 2019, respectively. At the same time, the medium-term lending facility due in the first quarter of 2019, (MLF), will not be renewed. This arrangement can basically hedge the liquidity fluctuations caused by cash delivery before the Spring Festival this year, and will help financial institutions to continue to increase their support for small and micro enterprises and private enterprises.
The person in charge of the people's Bank of China said: lowering the rate to replace medium-term lending facilities to support the development of the real economy
1. How much money will be released in the medium-term loan facility?
A: this reduction will release about 1.5 trillion yuan of funds, plus the funds released by the upcoming targeted medium-term lending convenience operation and the dynamic assessment of the directional reduction of inclusive finance. After considering the fact that the medium-term borrowing facility due in the first quarter of this year will no longer be continued, the net release of long-term funds is about 800 billion yuan.
2. Does the reduction mean a change in the orientation of prudent monetary policy?
A: this reduction still belongs to targeted regulation and control, not flooding, and the orientation of prudent monetary policy has not changed. The implementation of the rate reduction policy is divided into two stages, which is in line with the rhythm of cash delivery before the Spring Festival, which is conducive to maintaining a reasonable and abundant total liquidity in the banking system, and at the same time taking into account the internal and external equilibrium. It will help to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
3. How does the reduction support the real economy?
A: the reduction and related operations have released about 800 billion yuan of long-term incremental funds, which can effectively increase the sources of loans for the real economy, such as small and micro enterprises and private enterprises. The replacement of medium-term lending facilities can also directly reduce the interest payment cost of relevant banks by about 20 billion yuan per year, which is beneficial to reduce the cost of the real economy through bank transmission. All these are conducive to supporting the development of the real economy.
Is the central bank's rate cut a strong medicine for the market, and will the recent weak commodities be pulled up by the timely rain?
Vice General Manager of CUHK Futures and Chief Economist / Jingchuan: the central bank's rate reduction is a counter-cyclical operation after the arrival of the New year, which aims to ease the slowdown in economic growth and deal a blow to the macro economy caused by the weakness of the manufacturing industry. Therefore, commodities have a certain boost in the short term, but because a cut in the standard will not reverse the overall economic situation, and it is difficult to completely change the current situation of insufficient demand, so for commodities, It creates a short-term boost without fundamentally changing the tone of the bear market.
Jiang Xingchun, director of the Soochow Futures Research Institute: no, the sharp reduction is to hedge the downside risks of the economy and the shortage of funds during the Spring Festival. At the same time, the medium-term lending convenience is no longer continued, the actual investment scale is about 800 billion yuan, the overall commodity pulse rebound after the performance differentiation, non-ferrous recommendations are still short on the rebound.
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