Decryption: why the Federal Reserve to raise interest rates 10 hours later, the Chinese central bank also added

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Decryption: why the Federal Reserve to raise interest rates 10 hours later, the Chinese central bank also added

2017-03-19 06:31:51 117 ℃

On Thursday morning, China's central bank also introduced its own interest rate adjustment measures for the Fed's interest rate hike. China and the United States have tightened their monetary policy through multiple channels of liquidity in a seemingly bizarre and concerted action. The actions of the Chinese central bank and the Federal Reserve announced that the benchmark interest rate will be increased by 0.25% of the move is only about 10 hours. The Fed's introduction of the interest rate hike is the third increase in interest rates in the past 10 years.

The central bank raised interest rates for the two countries synchronous unusual action, prompted Bloomberg began back in 2016 during the January the mysterious "Shanghai protocol (Shanghai Accord)", the agreement appeared in the global capital market crisis erupted last year peak. As a result of a closed door discussion, the day has moved away from the public - and it has kept the market going on until today. As Bloomberg said, the coordinated action, in response to the group of 20 nations in Shanghai for more than a year ago, the so-called "commitment" carefully calibrated and clear communication "expression, may not be a tenuous argument.

China's central bank is not the first time to keep pace with the Fed's monetary policy adjustments. At the height of the global financial crisis, China's central bank stepped up its lending rate after other central banks, including the Fed's previously announced rate cut. As part of the global economic policy loop, China's central bank cut interest rates in October 2008 to further strengthen its reputation as an emerging country. Singapore from the Bank of Malaya (Maybank) senior economist Chua Hak Bin said: "the global economic growth is gradually transformed into differences growth, and monetary policy differences is part of the expected strong dollar of subjective expressions. Now, this divergence is also being transformed into policy synchronization".

Whether it is coordinated or not, China's financial market conditions similar to the day of the United states. Even if China and the U.S. stock market did not respond accordingly, but the monetary policy of both China and the u.s..

Therefore, for those curious about Chinese followed by the interest rate policy is against the benchmark interest rate or deposit reserve ratio (RRR) of the people, it seems to let themselves in a temporary period of hibernation -- from Societe Generale economist Yao Wei gives a not only relates to the technical level also relates to reason explanation.

As Mr Yao Wei puts it, China's central bank is closely following the Fed's actions, at least for the time being. And from today's curve changes, the central bank raised its main liquidity management tool interest rates 10 basis points, far more than most of the previous expectations. China's central bank introduced the interest rate policy, the country's most important seven day reverse repo operating rate rose to 2.45%.

China's central bank said in its press release, the inter-bank interest rate hike is simply to follow the trend of market behavior, rather than the real interest rate policy. Only the benchmark lending rates and deposit rates raised, can be regarded as the real interest rate policy. However, changes in interbank interest rates, the central bank also lists four typical reasons for this interest rate hike: economic recovery and rising inflation (especially housing prices), strong credit growth and the Fed launched measures.

China's central bank is responding to the fundamentals of economic growth, inflation and the stability of the financial system. The central bank is paying attention to the reduction in food prices as a result of the suppression of the CPI price index, as well as the concern of the domestic asset bubble and credit growth.

However, China's central bank is still inclined to adopt monetary tightening to cope with their neutral and stable policy stance. This means that the adjustment of inter bank liquidity and inter bank interest rates may still be the main action of the central bank reserves. This may be because China's domestic CPI index is still at a low level caused by. Or there is a possibility that the central bank is ready to adjust the direction of its interest rate from the benchmark interest rate / loan interest rate, and gradually shift to inter bank interest rates, and this is a good practice. In any case, the central bank does not want the market trend ahead of its own policy adjustments, but also do not want to tighten monetary policy. At this point, the Central Bank of China with the Fed's basic ideas.

In China's central bank's policy thinking, the Fed's monetary policy and the Sino US currency spreads play a certain role. Compared with the Fed raised interest rates by 25 basis points, China's central bank raised interest rates on the basis of the practice of 10 yuan, the role of the RMB is not helpful. So it may not be a very important consideration. However, the Fed's action to provide an opportunity to take action to the central bank, which also seems to support the central bank's interest rate hike is the "follow the market" perspective.

Taking into account the latest move by the Chinese central bank, outsiders believe that the stability of China's domestic economic growth will continue until the end of 2017. Now, Societe Generale Bank further expected that the adjustment of China's domestic interbank interest rates, the second quarter will be raised by 20 basis points in the third quarter will be raised by 10 basis points in the fourth quarter will not raise interest rates.

Also worthy of attention is the trend of development, as a result of China's central bank's daily liquidity management, the inter-bank market interest rate changes need to cause concern. These changes in market interest rates lead to changes in the interest rate of China's central bank regulation tools, which also reflects the central bank's policy intentions in a more timely manner. Today before taking measures in the central bank, the domestic 7 day repo rate in the 28 day moving average has been 50 basis points above, higher than the 2016 August lows.

Finally, while China has traditionally shied away from positive criticism of the Fed's use of traditional channels for interest rate adjustments, the traditional Chinese media have published an editorial article. The author of this editorial article said that China should alert the Fed rate hike "spillover effect", and warned that the U.S. interest rate policy self centered ", has led to a number of countries in the history of the financial crisis. Finally, the media also warned that the Fed's interest rate policy may have a serious impact on the global economy".

Pay close attention to the central bank's reverse repo tool, if China's central bank is really worried about the Fed's interest rate policy, it is likely to raise interest rates again".