There is still room for reserve requirement and interest rate cuts. On the front page of China Securities News: Monetary Policy Reserve Tool | Monetary Policy | Reserve

There is still great potential for monetary policy to consolidate the positive trend of economic recovery.

Experts say that there is ample room for monetary policy to increase its regulatory efforts. It is expected that relevant departments will flexibly use tools such as reserve requirement cuts and interest rate cuts in response to changes in the economic situation, while also implementing the "addition and subtraction method" of structural monetary policy tools, and increasing support for key areas and weak links of the real economy.

Expected to lower reserve requirements again in the third quarter

With the continuous promotion of "broad credit", monetary policy is expected to continue to intensify in the next stage. Experts predict that the central bank may implement another reserve requirement reduction in the third quarter to boost overall social demand.

"In the case of insufficient total demand, the effectiveness of monetary policy will be problematic. The most acute problem currently faced is insufficient total demand, or in other words, insufficient effective demand. In this situation, it is necessary to further relax monetary policy, and the transmission mechanism of monetary policy also needs to be further improved." said Yu Yongding, member of the Chinese Academy of Social Sciences.

To continue to maintain the steady growth of the total amount of money has become the current market consensus. In order to increase liquidity support for financial institutions, Lian Ping, chief economist and director of the Research Institute of plant credit investment, believes that the statutory deposit reserve ratio is expected to continue to be lowered in the third quarter, so as to effectively hedge the medium-term lending facilities that will expire in the third and fourth quarters, so as to maintain a reasonable supply of medium-and long-term liquidity, increase the available funds of financial institutions, and reduce the risks of maturity mismatch.

Luo Zhiheng, director of the Guangdong Development Securities Research Institute, said that the current weighted average statutory deposit reserve ratio of commercial banks has room for further reduction. Timely and appropriate downgrades will help maintain a reasonable abundance of liquidity, promote reasonable credit growth, and promote a steady decline in corporate financing and residential credit costs.

Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, recently stated that in accordance with the needs of the economic and price situation, we will increase macroeconomic regulation and implement a prudent monetary policy accurately and effectively. We will comprehensively use various monetary policy tools such as deposit reserve ratio, medium-term lending convenience, and open market operations to maintain reasonable and sufficient liquidity in the banking system, maintain reasonable growth of monetary credit, and promote the stable and moderate reduction of financing costs for enterprises and residents.

Smooth the transmission mechanism of interest rates

In addition to quantitative tools, some experts believe that the possibility of price based monetary policy tools continuing to be used within the year still exists.

Yu Ze, a professor at the School of Economics at Renmin University of China, said that from the corporate side, the economic cycle is gradually slowing down. There is a need to further reduce corporate financing costs and interest payments in order to reduce cost pressures. In the process of lowering interest rates, the level of the bank's net interest margin also needs to be considered. It is recommended to further cut interest rates across the board, taking into account both ends of deposits and loans, liabilities and investment, so as to ensure a certain and normal bank net interest margin and prevent excessive risk accumulation in the commercial banking sector.

"In the second half of this year, especially in the third quarter, relevant departments may be more cautious in the use of price based tools." Lian Ping said that the central bank may moderately lower the interest rates of structural tools such as agricultural and small scale re loans and special re loans in the second half of the year. After the Federal Reserve's interest rate hike process has basically ended, it is not ruled out that there is a possibility of a slight interest rate cut in the fourth quarter.

Sun Binbin, Chief Fixed Income Analyst at Tianfeng Securities, believes that the window for interest rate cuts may appear as early as the fourth quarter. He analyzed that only a month has passed since the implementation of the interest rate cut in June, and the incremental policy is still being studied and launched. Therefore, the possibility of another interest rate cut in the near future is not high. In addition, considering that the overseas interest rate hike process has not yet ended, China's monetary policy operation still needs to pay attention to internal and external balance.

The key is to unblock the transmission mechanism of interest rates. Yu Ze said, "Through years of reform, China has basically formed a market-oriented interest rate formation and transmission mechanism, and has constructed a central bank policy interest rate system including 7-day reverse repurchase rate and medium-term lending convenience. The policy interest rate directly affects the market benchmark interest rate, thereby affecting the market interest rate. However, there are still some obstacles to fully play the role of this mechanism, and it is necessary to clear the transmission mechanism through market-oriented reform."

Flexible use of structural tools

The flexible use of structural monetary policy tools is also highly anticipated. Experts suggest that increasing efforts to leverage the regulatory function of structural monetary policy tools may be one of the key areas for subsequent monetary policy efforts to stabilize growth.

In recent years, the frequency of using structural tools has been relatively high, and at the same time, the central bank insists on the use of structural tools with progress and retreat. Zou Lan stated that for policy tools whose implementation period has ended, the stock balance will continue to play a policy role, ensuring that the support of the banking system for relevant fields does not weaken. If necessary, new policy tools can be created to provide precise financial support for key areas and weak links in the high-quality development stage.

Lian Ping believes that in order to better coordinate fiscal policies and provide targeted support for weak links in economic operation, such as small and medium-sized private enterprises or individual difficult industries, there is still a possibility of moderately innovating and introducing structural tools such as re loans.

In the view of Lu Zhengwei, Chief Economist of Industrial Bank, there is significant room for innovation in structural monetary policy tools in three aspects. One is technological innovation. Funds supporting the financing of technology enterprises can be established through mortgage supplementary loans, refinancing, or issuing policy financial bonds. The second is infrastructure construction related to new energy. The third is the interest reduction tool for public facility loans.

Experts also believe that the use of some structural tools can be increased. Luo Zhiheng said that there are still many structural monetary policy tools that are used on a relatively low scale, and incentive mechanisms should be established and improved to encourage financial institutions to continue to increase their support for key areas and weak links of the national economy, such as inclusive finance.