People's Bank of China: Improve the market-oriented interest rate formation and transmission mechanism, strengthen the guiding role of the central bank's policy interest rates

The People's Bank of China released the monetary policy implementation report for the third quarter of 2024. A prudent monetary policy should be flexible, moderate, precise, and effective. It is essential to maintain reasonable and ample liquidity, guide reasonable growth in credit, and ensure balanced allocation, keeping the scale of social financing and money supply aligned with economic growth and price level expectations. Promoting a reasonable rebound in prices is an important consideration for guiding monetary policy, aiming to keep prices at a reasonable level. Improve the market-oriented interest rate formation and transmission mechanism, strengthen the guiding role of the central bank's policy interest rates, enhance the effectiveness of the self-discipline mechanism for market interest rate pricing and the market-oriented adjustment mechanism for deposit rates, improve the independent and rational pricing ability of financial institutions, and promote a stable decrease in corporate financing and household credit costs. Focus on key areas, maintain reasonable moderation, and adopt a balanced approach, continuously enhancing the "five major tasks" of finance, effectively strengthening high-quality financial services for major strategies, key areas, and weak links, and improving the adaptability and precision of financial services to economic structural adjustments and dynamic balance. Smooth the transmission mechanism of monetary policy, continuously enrich the toolbox of monetary policy, and improve the efficiency of fund utilization. Adhere to a market supply and demand-based approach, adjust with reference to a basket of currencies, and implement a managed floating exchange rate system, giving the market a decisive role in exchange rate formation. Implement comprehensive measures, strengthen expectation guidance, prevent the formation of unilateral consistent expectations that may become self-fulfilling, resolutely guard against the risk of exchange rate overshooting, and maintain the stability of the RMB exchange rate at a reasonable and balanced level. Improve the macro-prudential policy framework and the systemic financial risk prevention and disposal mechanism, ensuring that systemic financial risks do not occur