The Central Bank Has Enlarged Its Recruitment, But Few People Can See It Clearly.

The central bank announced through its official micro-blog: in November 20, 2015, it lowered the "standing lending facility (SLF)" interest rate of branches.

For the local legal person financial institutions that meet the macro prudential requirements, the interest rate of standing loans for overnight and 7 days is adjusted to 2.75% and 3.25% respectively.

Interest rates in China

Before the reform, the central bank announced the deposit and loan interest rate, which is the most important official.

It is also widely implemented by banks and other financial institutions.

But as interest rate liberalization continues to advance and is basically completed in the near future, although the central bank still lays down the benchmark interest rate, banks are only referring to the implementation.

In this way, a question arises: which interest rate is the most important benchmark interest rate? What interest rate does the so-called "central bank cut interest rate" refer to in the future?

When the SLF was just set up, the central bank announced three interest rates of overnight, 7 and 14 days. In March 4th this year, the 14 day varieties were cancelled.

In the March 4th adjustment, overnight interest rate dropped from 5% to 4%, and today it has dropped to 2.75%; the 7 day SLF rate is down from 7% to 5.5%, and today it has dropped to 3.25% again.

That is to say, over the past year, the rate of interest rate drop in SLF has been very strong.

This will play a certain role in guiding market interest rates to go down.

In other words, an unprecedented simple problem will become more and more complicated.

According to the latest version of the prime minister in November 5th, the future interest rate regulation will be like this:

We should continue to play the role of deposit and loan.

We should use the tools of reference and guidance, make good use of short-term repo rate, refinance and medium-term loan convenience, and straighten out the policy interest rate pmission channels to the market interest rates such as bonds and credit, so as to form a curve of market returns.

Obviously, deposit and lending rates will become less important than before. Interest rates on short-term repo rates, refinancing and medium term lending will play a more and more important role.

But there is no mention of SLF, which is the interest rate cut by the central bank today.

SLF is a commonly used monetary tool in western countries. The Central Bank of China began to introduce it in January 2014. Its main role is to limit the interest rate to the monetary market.

The specific approach is: once the legal institutions within the jurisdiction of the national interbank lending center and the bond repurchase paction interest rate reached or broke through the official SLF interest rate, that is to start the SLF operation.

At that time, commercial banks, etc., can use qualified collateral (including high credit rating of bond assets and high-quality credit assets, etc.) to obtain a certain level of interest from the central bank.

That is to say, if you can't get cheap money from the market, the central bank can give you.

Therefore, the price of capital has been suppressed. In any case, this is a rate cut action, which has a positive effect on reducing the financing cost of enterprises.

And the interest rate cap will be more secure at the end of the year.

This is good for the stock market and the real estate market.