This morning,the central bank issued an announcement that the reverse repo rate for 14 days was cut by 10 basis points,from 1.95% to 1.85%!

In an instant,this news made headlines on major financial media platforms.

Is this a rate cut?

Yes and no!

China's current benchmark interest rate is the LPR (Loan Prime Rate),which was announced on the 20th of this month and remains unchanged,with no rate cut.

The reverse repo is currently the most important policy interest rate,and its changes are a barometer for future LPR rates.

There are mainly two types of reverse repos,one is the 7-day reverse repo,and the other is the 14-day reverse repo.

According to the current definition of the central bank,the 7-day reverse repo rate is the most important.

The 7-day reverse repo is basically available every working day,and it is the most reliable barometer for LPR.

The 14-day reverse repo is basically "fishing for three days and drying nets for two days," or even "fishing for a few days and resting for several months."

For example,at the beginning of this year,the central bank initiated seven consecutive 14-day reverse repos in early February,and then there was no movement.

Today's (September 23rd) 14-day reverse repo is the first since February 9th.

Since February 9th,the central bank has had two rate cuts.

The rate cut in February was a 25 basis point cut in the 5-year LPR,with no change in the 1-year term; the rate cut in July was a 10 basis point cut in both the 1-year and 5-year terms.

We can consider today's 10 basis point cut in the 14-day reverse repo as a recognition of the previous rate cuts,especially the 10 basis point cut in the 1-year LPR in July.

Therefore,today's 14-day reverse repo rate cut is not a signal for a rate cut in the LPR next month,at least not obvious.

Because the 7-day reverse repo did not cut rates today.

But even so,I still believe that there will be a rate cut in LPR in October or November,with a strength of about 10 to 15 basis points.

The Federal Reserve has already started a rate cut cycle,and the most severe period of China-US interest rate inversion has passed.

China will usher in a more substantial rate cut.

The reason why China is not in a hurry to cut rates is that it is worried that cutting rates too quickly will exacerbate the maladaptation of the banking,insurance,and other industries.

It should be the case that when the economic pressure is great,the rate should be cut quickly.

But if the China-US interest rate inversion is too serious,it will lead to capital outflow.

Cutting rates too quickly will also reduce the bank's interest spread,affecting the bank's performance.

Bank stocks are the valuation basis of A-shares and are also the main varieties that the national team bought to support A-shares before,which is the main battlefield of "China's special valuation."

Rapid rate cuts may lead to poor bank performance.

It should be the case that after the bank loan rate is cut,the deposit can also be cut equally to maintain a stable interest spread.

But if the deposit rate is cut too quickly,it will cause deposits to move to bank wealth management,rather than coming out to consume and invest.

The bond market is now hot,and bank wealth management mainly invests in the bond market.

If the deposit rate is cut too quickly,the bond market will continue to be hot,and the risk will increase.

In short,one link follows another.

The central bank,out of prudent consideration,will slow down the pace of rate cuts.

But this does not mean that China will not cut rates in the future.

In the next 2 to 3 years,continuous rate cuts are highly likely.

As long as there is no new trade war or other "fighting and breaking" situations between China and the United States,China's interest rates will continue to decline,and it is possible to cut the LPR by 80 to 100 basis points in 2 to 3 years.

In addition to cutting rates,the central bank also has the weapon of reducing reserves.

Various signs show that the possibility of using reserve reduction first in the near future is relatively large.

And the probability of reducing reserves before October 1st is also relatively large.

I have previously speculated in my articles that due to the need to rush performance (GDP) in the fourth quarter,coupled with the current cooling of the housing market again,there may be a "930 big gift package."

Historically,housing market regulation often introduces more significant policies around September 30th,either to suppress or to encourage.

If there is a policy this year,it is of course to encourage.

The "930 big gift package" may include the following: 1.

Reducing reserves; 2.

Announcing a rate cut for existing mortgages; 3.

Relaxing the housing market in first-tier cities.

In fact,recently Beijing and Guangzhou have made big moves.

Beijing announced that it will cancel the "standard of ordinary and non-ordinary housing," which means that the situation where more than 85% of Beijing's housing is "luxury housing" and has to pay a high "luxury housing tax" is about to end.

Each second-hand house can save tens of thousands,or even hundreds of thousands of yuan in taxes.

In Guangzhou,Nansha quietly canceled the purchase limit.

No announcement,only implementation.

Next,let's see what big moves Shanghai and Shenzhen will make.

If there are big moves in Beijing,Shanghai,and Shenzhen,and Guangzhou only relaxes in Nansha,it seems too small and needs to be increased.

In addition,there are Tianjin and Hainan,two provinces and cities with inexplicable confidence,still retaining purchase limits.

Now is also the time to cancel.

The cancellation of purchase limits I mentioned is that people from other places can buy one set unconditionally without social security,personal income tax,and residence permits; it is not 100% without purchase limits,and one person can buy 100 sets,1000 sets at will.

Recently,the exchange rate is very strong.

The following figure is the offshore exchange rate of the renminbi against the US dollar (Hong Kong market price),the highest has reached 7.0378 per US dollar,and it is about to break through 7!

The onshore renminbi exchange rate (Shanghai market price) is also similar,the latest is 7.0498.

This has surprised and shocked many "run people," and they can't understand it.

In fact,it is very understandable.

The current exchange rate of the renminbi is undervalued.

If there is no unprecedented major change,it should be 6 to 1 with the US dollar.

Just look at China's export volume and trade surplus.

In the first eight months of this year,China's trade surplus reached as high as 608.49 billion US dollars,a year-on-year increase of 11.2%.

China's foreign exchange reserves exceed 3 trillion US dollars,accounting for about 30% of the total foreign exchange reserves of all countries and regions in the world.

With strong foreign exchange reserves and high trade surpluses,and Chinese manufacturing has full competitiveness,the renminbi indeed has reasons to maintain stability and strength.

As long as China-US relations maintain a fight without breaking,as long as China continues to improve the investment environment and actively participate in the global economic cycle,exchange rate stability is no problem,and periodic appreciation is also no problem.

The recent appreciation is also closely related to the slight adjustment of the national strategy.

The official proposed to counter the internal volume-type vicious competition,the traditional investment attraction methods,and the traditional subsidy methods are all being adjusted.

Its goal is to maintain a good trade relationship with major trade partners,especially Europe,the United States,and Japan.

And the renminbi exchange rate remains strong,which also has this factor.

The Federal Reserve has started a rate cut cycle,and the future space for the United States to cut rates is greater than that of China,which is also an important reason for the strong renminbi exchange rate.

Before the US election,there is a possibility that the renminbi exchange rate will break through 7.

But in the future,the chance of breaking through 6.8 should not be too great.

If it breaks through,it may also come back.

As long as Trump is not elected,the renminbi exchange rate is likely to fluctuate between 6.8 and 7.1 in the next year.

If Trump comes up and really imposes a 60% tariff on China,a moderate devaluation of the renminbi may occur.

For example,it may return to 7.3,or even 7.4.

Recently,China has seen a situation where both bonds and exchange rates are bullish.

The bond market is very strong,and it has been strong for more than a year,so the central bank has intervened,which I have analyzed many times.

In the past two months,the exchange rate has also been very strong.

Next,will this "bullish" be passed on to the stock market and the real estate market?

I think,the double bull of bonds and exchange rates,on the surface,may divert funds from the stock market and the real estate market.

But after all,it is an era of asset scarcity,money is not lacking,what is lacking is confidence.

The double bull of the bond market and the exchange rate market will eventually infect the real estate market and the stock market,and the heat will slowly be transmitted.

If the policy is more cooperative - issuing more government bonds,adding more leverage to the government,reducing reserves,and cutting rates more,then the economy will slowly get better.