The tools that the central bank can now use to directly inject liquidity into the market include open market operations (that is, forward repurchase and reverse repurchase), MLF (medium-term lending facility), SLF (standing lending facility), SLO (short-term liquidity adjustment tool) and PSL (supplementary mortgage loan).

It seems that there are many tricks, but the core is similar: banks provide collateral to the central bank, and the central bank provides funds to banks, agreeing on a certain term and interest rate. After the expiration, the bank will return the funds plus interest to the central bank, which is actually a financing repurchase; It can also be understood that banks sell a batch of assets to the central bank, and after a certain period of time, they buy back these assets at a higher price than before. This price difference is the interest of financing repurchase.

The difference between each tool is that they may have different maturities, different available collateral, different interest rates and different targets. For example, the term of reverse repurchase in open market operation is usually 7 days, 14 days, 28 days, etc. , and the duration of MLF is generally 3, 6, 12 months.

Different tools include RRR reduction: that is, the central bank reduces the statutory reserves that banks need to deposit with the central bank by reducing the deposit reserve ratio. For example, if a bank deposits 200 billion yuan and the reserve ratio is reduced from 20% to 19%, then the reduced reserve is 2000 *1%= 2 billion yuan, which can be used by banks.

Another special way to inject liquidity is the maturity of central bank bills: that is, in order to recover funds from the market, the central bank issues bonds, that is, central bank bills, for banks to buy. At maturity, the central bank will return the principal and interest of the bond to the bank, which is equivalent to injecting liquidity.

Extended data:

Liquidity is divided into financial market liquidity, central bank liquidity and commercial bank liquidity. We often say that liquidity is the liquidity of banks, and popularly speaking, it is the problem of money supply. The so-called excess liquidity means that the growth rate of broad money exceeds the sum of economic growth rate and inflation rate, which means that too much money means too few goods, which will lead to blind investment and rising prices.