April 23, in response to market rumors: the central bank from the 25th (Thursday) to some agricultural commercial banks, rural credit cooperatives and other rural financial institutions targeted cut of 1 percentage point. The central bank said the news was not true and that it did not have a new targeted reserve cut policy, according to the Financial Times, a media outlet of the central bank.

This is the second time in less than a month that the central bank promptly denied the rumors of a reserve requirement cut in the evening, from which we can also see the current attitude of the central bank towards the reserve rate cut. Recently, although it has been repeatedly stated by the authorities that monetary policy will be pre-adjusted and fine-tuned in time according to economic growth and changes in the price situation, and it is generally analyzed that there is little chance of further easing of monetary policy in the future, there are still rumors of reserve requirement cuts one after another, which also reflects the market's desire for central banks to lower reserve requirements.

However, the recent idea of a reserve requirement cut may be wishful thinking of the market. Judging from the official statement and action, it is unlikely that the reserve requirement will be lowered again in the short term.

On the evening of April 23rd, the central bank refuted the rumors twice in less than a month. On March 29, someone on the Internet, under the guise of "authoritative News Agency News," spread the rumor that "the people's Bank of China has decided to lower the deposit reserve ratio of financial institutions by 0.5 percentage points from April 1, 2019," which was denied by the central bank that night. debunk the rumor in time.

Not only that, the central bank has also taken a stronger-than-expected attitude towards spreading rumors of reserve rate cuts. On April 2, Weibo Corp, official of the General Office of the people's Bank of China, reprinted the commentary article "Chengfang Street Review: a reminder to rumor mongers in the financial market," that the central bank had also formally written to the public security organs on this matter. please investigate and deal with this fabricating and publishing false information in accordance with the law.

Combined with the timely clarification of the rumors of a targeted reserve cut by the central bank again, we can see that the central bank's resolute attitude towards monetary policy rumors is not only a warning to rumors in the financial market. it is also a warning to all participants in the financial market-- do not believe rumors, do not spread gossip.

The above commentary points out that information is too important in financial markets. It can be said that information is the nerve of financial market transactions. It is based on information that all parties in the market price and trade. The true, accurate and complete information, and the timely, fair and orderly dissemination of information are the cornerstones of the fair and fair operation of the market. The distortion of information and internal information based on violations of laws and regulations are the root causes of financial crimes, corruption and rent-seeking that damage the fairness and justice of the market. Because of this, fabricating and spreading false financial information is strictly prohibited by the laws and regulations of our country. Rumors of a "reserve cut", if not clarified and stopped in a timely manner, will also lead to serious consequences. This is because monetary policy has a bearing on the overall situation, and major policy measures such as "reserve reduction" will inevitably have an impact on all aspects of macroeconomic operation and the operation of various financial markets.

In addition, on April 23, the central bank also pointed out that in response to media reports that "relevant institutions have dynamically adjusted the deposit reserve ratio according to the results of the quarterly MPA (Macro prudential Assessment) assessment", this report is also inconsistent with the facts. At present, the central bank does have a targeted reserve reduction policy for inclusive finance, but it only conducts a dynamic assessment and adjustment at the beginning of the year.

In January this year, the central bank launched a dynamic assessment of targeted reserve reduction of inclusive finance in 2018. The central bank said the review was only carried out at the beginning of each year, not every quarter.

Recently, the orientation of future monetary policy has been the focus of the market. Officials have also made statements on the orientation of monetary policy at different meetings. Combined with recent official statements, the market has in fact gradually made clear the expectation of the next step of monetary policy.

For example, at the regular meeting of the Monetary Policy Committee of the Central Bank of China in the first quarter, new expressions such as "keeping the general floodgate of the money supply well" and emphasizing the maintenance of strategic stability and policy coordination appeared again. On April 19, the meeting of the political Bureau of the CPC Central Committee pointed out that "prudent monetary policy should be loosened and tightened moderately." At the fourth meeting of the Central Financial and Economic Committee held on April 22, it was pointed out that "monetary policy should be moderately loose and tight, and timely pre-adjustment and fine-tuning should be made in accordance with economic growth and price changes." Combined with the central bank's recent resolute crackdown on the rumors of reserve requirement reduction, we can see that the probability of reserve requirement reduction in the near future is small, and there is little room for the central bank to further ease its monetary policy in the next step.

Although there was a gap in the base currency in April due to liquidity factors such as the massive maturity of MLF and centralized tax payments, why did the central bank not choose to cut reserve requirements at this time? Why is it that judging from the statements made at several official meetings, there is little chance that the central bank will further ease monetary policy? This may be mainly due to inflation expectations and factors controlling the resurgence of asset bubbles.

Sheng Songcheng, former director of the investigation and Statistics Department of the Central Bank, pointed out recently that the recent executive meeting of the State Council proposed to step up the establishment of a policy framework for a lower deposit reserve ratio for small and medium-sized banks. this may mean that the central bank will adopt a clearer system of different reserve requirements for large, medium and small banks in the future, but may not be a signal of targeted reserve cuts in the near future. At present, it is advisable to maintain a stable monetary policy, observe more and take one step at a time.

Sheng Songcheng believes that most of China's economic data in the first quarter have improved, indicating that the policy lag is coming to an end; at present, China's interest rates have fallen much lower than last year, indicating that the liquidity of the money market is reasonable and abundant, and the reserve ratio will be lowered when the economy stabilizes. It is easy to push up inflation, and it is also easy to push up asset prices. It is necessary to guard against the "reality-oriented demand" of funds, especially against the new round of rising house prices.

In addition, the recent issue of inflation has once again attracted much attention, and the rise in inflation will also become an important factor restricting the further easing of monetary policy. Wang Junxun, deputy director of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and villages, said on the 23rd that pig prices have entered the upward cycle ahead of schedule. We predict that pork production will decline for the whole year, the supply of live pigs will tighten in the later period, and live pig prices will break through the all-time high of 2016 in the fourth quarter.

The arrival of the "pig cycle" will drive up inflation, which in turn will affect the trend of monetary policy.

Guotai Junan Securities Macro team believes that based on historical comparisons and quantitative calculations, pork prices may grow by 45% 55% by the end of the year, which will push up CPI inflation by up to 2 percentage points. Excluding other effects such as value-added tax, pig prices can push CPI above 3 per cent in the second half of the year, which will not lead to a big change in monetary policy, but the probability of interest rate cuts does decline in the second half of the year.

Fan Ruoyi, a researcher at Bank of China Ltd. Institute of International Finance, told reporters that monetary policy this year may not be as loose as the market expected at the beginning of the year, and will be tighter than in the previous period, but the overall sound tone will remain unchanged. The main considerations are:

First, the economic performance in the first quarter of this year is obviously better than the market expected. coupled with the smooth progress of Sino-US economic and trade consultations, the market is more optimistic about the future economic trend.

Second, under the influence of factors such as the advance of the "pig cycle" brought by African classical swine fever, there is a certain upward pressure on inflation, which restricts the room for further relaxation of monetary policy.

Third, the overall market liquidity is at a reasonable level, and it is better for the central bank to maintain reasonable and abundant liquidity through the implementation of open market operations.