The People's Bank of China authorized the National Interbank Funding Center to announce on July 20 that the loan market quoted interest rate (LPR) on July 20, 2022 was: 1-year LPR was 3.7%, and 5-year and above LPR was 4.45%, both unchanged from the previous period.
Experts believe that under the background that the medium-term lending facility (MLF) interest rate has not been adjusted and commercial banks' net interest margin is under pressure, the LPR's staying on hold is in line with market expectations.
Image source: China Money Network
The quotation basis has not changed
Industry experts said that if the MLF interest rate remains unchanged, the possibility of LPR adjustment in the current month is relatively small. Previously, the People's Bank of China renewed the MLF due in July in equal amounts, and the operating interest rate did not change, which means that the pricing basis of the LPR quotation for that month did not change.
From a banking perspective, the net interest margins of commercial banks are under pressure, and it is unlikely that LPR quotations will be lowered again in the short term. Wen Bin, chief economist of Minsheng Bank , analyzed that in recent years, the net interest margin of commercial banks has been in a downward channel as a whole. Since the second quarter, due to factors such as the intensification of "deposit regularization", the lower limit of first-home loan interest rates, and the significant reduction of LPR quotations with a maturity of more than 5 years, the interest rates of newly issued corporate loans and mortgage loans have been reduced by a larger margin. The decline in deposit interest rates is lower than the loan interest rates, and the net interest margin of commercial banks is expected to continue to show a downward trend.
From the perspective of internal factors, macro data in June showed that the economy has significantly recovered, and there is no need for LPR to fall this month. Oriental Jincheng chief macro analyst Wang Qing believes that macro data in June showed that the growth rate of consumption, investment and industrial production has fully turned positive, and economic recovery has accelerated; at the same time, the national real estate market transaction data in June showed improvement momentum.
From the external environment, maintaining the stability of LPR this month is also the best option. Wen Bin believes that U.S. inflation data continues to be high and the process of monetary tightening is accelerating. A stable domestic monetary policy will help balance internal and external balance.
Continue to release the effectiveness of LPR reform
Although LPR has not declined this month, the current comprehensive financing costs of enterprises are still stable and declining. Ruan Jianhong, director of the Survey and Statistics Department of the People's Bank of China, recently introduced that in June, the interest rate on newly issued corporate loans was 4.16%, 34 basis points lower than the same period last year.
"The newly established market-based adjustment mechanism for deposit interest rates in April is expected to continue to play a key role. Considering that deposits account for about 70% of bank liabilities, this will drive the bank's liability costs down significantly." Wang Qing said.
Director of the Monetary Policy Department of the People's Bank of China, Zou Lan, said that in the next stage, the People's Bank of China will continue to deepen the market-oriented reform of interest rates, continue to release the effectiveness of LPR reform, give full play to the role of the market-based adjustment mechanism for deposit interest rates, give full play to the role of the interest rate self-discipline mechanism, maintain a good competitive order in the market, promote the continued reduction of actual loan interest rates, and let the majority of market entities experience a real reduction in comprehensive financing costs.
"On the whole, prudent monetary policy will continue to adopt 'total + structural tools', focusing on stabilizing employment, stabilizing prices and preventing risks, while ensuring reasonable and stable growth of the total, while increasing support for weak links and key areas." Zhou Maohua, an analyst at the Financial Market Department of China Everbright Bank, believes that relevant departments will continue to maintain the normal competition order in the deposit market, guide banking financial institutions to strengthen asset and liability management, tap the potential of LPR reform, effectively reduce the comprehensive financing costs of the real economy, and ease the operating pressure of enterprises.
column editor: Qin Hong Text editor: Song Hui Source of title picture: Tu Chong Picture editor: Xu Jiamin
source: Author: China Securities News
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