In the modern economy, interest rate is the link between the financial field and actual economic activities, and is the hub in the currency transmission process. Therefore, it has always been used by governments as an important tool for macroeconomic regulation. Since the reform and opening up, with the continuous improvement of my country's market economic system and the acceleration of the market-oriented reform of interest rates, interest rates have gradually become an important parameter affecting the decision-making of economic entities, and have begun to play an increasingly important role in the operation of the national economy. Interest rate policies have also become increasingly important. It has become an important part of my country's monetary policy.

In 1996, my country's interest rate marketization process was officially launched. In the past 10 years of development, my country's interest rates have undergone two rounds of major interest rate adjustments with distinctive characteristics based on the macroeconomic background of different periods. From 1996 to 2002, through eight consecutive interest rate cuts and the subsequent formation of a new interest rate hike channel, the macroeconomic background and policy implications behind it are worthy of study. Represented by the one-year deposit benchmark interest rate and the one-year loan benchmark interest rate of financial institutions, the two rounds of fluctuations are shown in Figure 1:

1. Eight interest rate cuts from 1996 to 2002 and their macroeconomics Background analysis

From May 1, 1996 to February 21, 2002, the RMB interest rate was lowered 8 times in a row, with an average of about once every 8 months. The magnitude was unprecedented. Through successive interest rate cuts, the interest rate level has been adjusted from high to low, reaching the lowest level in more than 50 years since the founding of the People's Republic of China. The annual interest rate of one-year deposits dropped from 10.98 to 1.98, a decrease of 82%; the annual interest rate of one-year loans dropped from 12.24 to 5.31, a decrease of 57%. The average deposit interest rate has been reduced by 5.98 percentage points, and the average loan interest rate has been reduced by 6.92 percentage points. And overall, the longer the period, the greater the decline. Five-year deposits are 2.07 percent lower than one-year deposits, and loans are 2.43 percent lower. These eight interest rate cuts are of large magnitude and high density. We will analyze the macroeconomic development conditions and policy implications behind them and observe them one by one.

(1) Two interest rate cuts in 1996: the end of anti-inflation

In 1993, inflation appeared while my country’s economy was developing rapidly, which became a problem in economic development. Important questions. In response to this trend, the Central Bank raised interest rates twice in May and July 1993, and decided to start a value-preserving savings business again in July to protect the interests of savers. In order to further curb inflation and stabilize the market and economy, the deposit interest rate was raised twice more in January and July 1995. After three years of hard work, macro-control with the primary task of controlling inflation has basically achieved the expected goals, and financial operations have basically maintained a trend of stable development.

1996 was the first year of the implementation of the "Ninth Five-Year Plan". The overall macroeconomic situation was good, but there were many problems at the micro level. This year's macroeconomic control was still positioned at Counter inflation and achieve a “soft landing”. However, the moderately tight environment that lasted for three years at this time has caused new changes in my country's economy. Price growth has dropped significantly, investment in fixed assets has slowed down significantly, and the increase in bank deposits has become greater than the increase in loans. This situation It is rare since my country's reform and opening up. According to statistics, in the first half of 1995, new deposits by financial institutions exceeded loans by more than 400 billion yuan. This creates conditions and space for the central bank to lower deposit and loan interest rates on May 1. The first interest rate cut was very limited, and the overall level of interest rates remained high. Judging from price changes, the national price increase rate in the first half of 1996 was less than 7, and showed a downward trend. Not only have a considerable number of companies failed to get rid of losses, but some companies' profits have continued to decline. In light of this, deposit and loan rates have been cut again, just three months after the last rate cut.

The two interest rate cuts in 1996 were still a continuation and fine-tuning of the previous anti-inflation campaign. The main purpose was to appropriately reduce the burden on enterprises and promote the orderly and healthy development of the national economy. It is a major turning point in my country's interest rate adjustment.

(2) Continuous interest rate cuts from 1997 to 2002: the gradual advancement of prudent monetary policy

After the successful "soft landing" in 1996, "low inflation, high inflation" continued in 1997 growth”. With the gradual implementation of various national macro-control measures, the national economic situation has continued to maintain steady and healthy development, and at the same time, some new characteristics have emerged. First, a buyer's market has basically formed; second, although the price decline has slowed down after two adjustments in interest rates in 1996, it still continues to fall with downward inertia; third, although corporate economic benefits have improved, they have not yet Out of the woods; fourth, domestic demand showed signs of sluggishness, and the growth of total retail sales of consumer goods slowed down. Therefore, the central bank decided to lower the deposit and loan interest rates of financial institutions on October 23.

In 1998, the international economic environment faced by our country changed. The financial crisis sweeping Southeast Asia gradually had an impact on our country. The currencies of neighboring countries continued to depreciate, which brought stability to the value of the RMB and the expansion of foreign demand. Comes with a lot of pressure. At the same time, the rebound in domestic demand is not strong enough, and the consumer goods market still maintains a buyer's market structure. The increase in retail prices has been negative every month since September 1997. In addition, since Japan took the lead in lowering interest rates on September 9, 1998, the United States, the United Kingdom, Canada, Eurozone countries and many Asian countries and regions followed suit, keeping global interest rates at a very low level. In this international and domestic environment, three high-frequency interest rate cuts on March 25, July 1, and December 7, 1998 became part of the requirements for my country's economic marketization and international development. The three reductions have resulted in an average cumulative reduction of RMB deposit interest rates by 1.15 percentage points, an average cumulative reduction of loan interest rates by 2.22 percentage points, and a simultaneous narrowing of deposit and loan interest rate spreads.

By 1999, although the GDP growth in the first quarter reached 8.3% year-on-year and fixed asset investment accelerated, some factors that restricted economic growth in the early stage have not been fundamentally resolved, and it cannot be concluded that Whether the economy as a whole has entered a recovery phase. The main basis is: first, my country's exports continue to decline. For countries affected by the Asian financial crisis, the depreciation of their currencies has given them a price advantage in exports, and the adverse impact on my country's exports has already emerged. Second, while household consumption remains sluggish, household savings have further increased. In the first quarter of 1999, residents' savings deposits increased by 444.6 billion yuan, an increase of 155.1 billion yuan over the same period last year. Third, in terms of investment, the investment growth in the first quarter was unable to form a sustainable trend. The reason is that the effectiveness of the fiscal policy last year decreased month by month and the profitability of enterprises continued to remain at a low level. To this end, another interest rate cut occurred on June 10, 1999.

Since then, the economic growth of the three major "economies" of the United States, Japan and the European Union has continued to decline since 2001, driving the pace of world economic growth to continue to slow down. This has had a significant impact on China's economic development, especially the decline in foreign trade growth, which has led to a certain decline in the power of foreign trade demand to drive economic growth. There are also some uncertainties in domestic economic growth. For example, although investment demand has been vigorously boosted by proactive fiscal policies, private and social investment demand has not been fully activated; the growth of consumer demand is still unstable, and great efforts are needed to increase farmers' income. In 2001, my country's GDP growth showed a downward trend quarter by quarter, and the consumer price index also declined for several consecutive months. On the basis of analyzing the international and domestic financial situation, the central bank cut interest rates for the eighth time since 1996 in early 2002.

In general, this round of sharp interest rate cuts is aimed at my country's slowdown in economic growth, slowdown in investment and consumption, and exports due to the problems in the microstructure of domestic economic development and the impact of the Asian financial crisis. A sharp decline, insufficient effective market demand, continuous negative growth in prices, and the emergence of deflationary trends. Important measures to expand domestic demand and a sound monetary policy must be taken in a timely manner.

2. Analysis of the four interest rate increases from 2004 to 2007 and their macroeconomic background

After eight consecutive interest rate cuts, my country’s economy has developed steadily in a low interest rate environment. However, it has also New problems such as economic overheating and excess liquidity have emerged, triggering a new round of interest rate adjustments.

(1) The first fine-tuning of interest rates from 2002 to 2005: the formation of the interest rate hike channel

After SARS, some new situations began to appear in the Chinese economy in the second half of 2003: the price level ended In the sluggish state, grain and food prices began to rise; the growth rate of fixed asset investment accelerated; the supply of energy, electricity, etc. began to be tight; the real interest rate was negative for nine consecutive months, resulting in the continued decline in the growth of residents' savings deposits and the falsehoods of the real estate industry There are many problems such as prosperity and the "extracorporeal circulation" of large amounts of money out of the banking system. At the same time, U.S. dollar interest rates in the international market continue to rise. From July 2003 to September 2004, as the country introduced a series of macro-control measures to reduce economic overheating, among the many monetary policy operations adopted by the central bank, the traditional tool of adjusting statutory deposits and loans was delayed. People's expectations for interest rate hikes gradually formed.

On October 29, 2004, the central bank finally decided to adjust bank deposit and loan interest rates: the one-year loan interest rate of financial institutions increased by 0.27 percentage points, and the one-year deposit interest rate increased by 0.27 percentage points. The increase in medium- and long-term deposit interest rates is greater than that of short-term deposits, reflecting the policy intention of interest rate leverage and controlling the excessive growth of fixed asset investment. Although the adjustment this time is small, it is an important signal for my country to promote market-oriented interest rate reform. It is also the first interest rate increase since 1995.

(2) Interest rates rose slightly from 2006 to 2007: the era of liquidity management

After the first interest rate increase, my country’s economic growth in 2005 showed the following characteristics: First, the heavy industrialization of economic growth The characteristics are obvious and have brought about negative impacts such as environmental pollution and energy waste; secondly, the momentum of fixed asset investment has been temporarily curbed; thirdly, the consumer market has recovered from the impact of SARS and has recovered and grown, and the structure has become more reasonable. With the purpose of further consolidating the results of macro-control, maintaining the good momentum of sustained, rapid, coordinated and healthy development of the national economy, and further leveraging the role of economic means in resource allocation and macro-control, interest rates were appropriately fine-tuned twice in 2006. The benchmark loan interest rates of financial institutions were raised on April 28 and the deposit and loan interest rates were raised simultaneously on August 19.

More importantly, during this period, the Chinese economy experienced the strongest international balance of payments surplus in history and continued to intensify the pressure on RMB appreciation. Foreign exchange reserves became the main part of my country's base currency investment, and credit Problems caused by excessive liquidity, such as excessive growth and capital market price blowouts, have become the main contradictions of the Chinese economy, making liquidity management the most important goal of the central bank. Since 2006, the statutory deposit reserve ratio has been raised five times. And it issues bills at high interest rates every month to tighten the excess currency flow in the market. However, the effect of these measures is not obvious. Experts estimate that there are still nearly 600 billion in funds in the market looking for exports. In a passive situation where the space for adjustment of deposit reserves is gradually shrinking, and weighing the greater pressure on RMB appreciation that may be brought about by raising interest rates, the central bank still chose to raise interest rates on March 18, 2007 to promote internal balance. A small interest rate hike still has little impact on the real economy and mainly serves as a warning. Excess liquidity remains the primary problem facing the central bank.

3. Overview of the basic factors driving my country’s two major interest rate adjustments

Through the above analysis of the economic background and policy implications of my country’s recent two major interest rate adjustments, it is undeniable that interest rates are As a powerful monetary policy tool, my country's interest rate adjustment reflects the mileage of my country's economic development on the one hand; on the other hand, it also reflects the characteristics and contradictions of the times in the development process of our country. The correlation between interest rate levels and my country's economic development level is constantly strengthening.

Theoretically, the factors that determine the interest rate level mainly include bank costs, average profit margins, loan terms and lending risks. However, experience shows that the interest rate level in the lending capital market fluctuates based on a certain level. The main factors affecting its fluctuations include the supply and demand of loan funds, social and economic operating cycles, expected price changes, tax rates, historical interest rates, international interest rates, exchange rates, national economic policies, etc. The level of deposit and loan interest rates in our country is determined by the central bank based on the development of the national economy and is an important means of macroeconomic control.

Judging from these two rounds of interest rate adjustments, the basic factors driving my country’s interest rate adjustments are as follows: 1. Interest rate policies change with the adjustment of macroeconomic conditions and goals, and the focus of macroeconomic regulation and control Determine the direction of interest rate adjustments. Among them, low interest rate policy has played a positive role in stimulating economic growth and revitalizing the market; high interest rate policy has played a positive role in curbing economic overheating and controlling inflation. 2. China’s interest rate adjustments are striving to adapt to the market, and liberalization and marketization are the trends guiding the characteristics of interest rate policies. 3. Interest rate policy is coordinated with other monetary policies, and the policy mix determines the fine-tuning characteristics of interest rates. 4. External shocks to the economic environment require interest rate adjustments to smooth out their impact. 5. Macroeconomic control departments use interest rate adjustments to express their determination and regulatory intentions and convey the "pledge effect" to society.

There are many factors that affect interest rate changes. Grasping the motivations of interest rate policies provides a basis for analyzing the trend of interest rate changes. Judging from the characteristics of the current stage, our country has entered the interest rate hike channel that marks a new era of liquidity management.