Core Viewpoint - The article discusses the construction of a scientific and robust monetary policy system and a comprehensive macro-prudential management system, emphasizing the need to narrow the interest rate corridor to enhance the effectiveness of the central bank's policy rates [1][10]. Summary by Sections Monetary Policy Framework - The central bank aims to strengthen the role of policy interest rates and narrow the width of the short-term interest rate corridor, facilitating the transmission from policy rates to market benchmark rates [1][10]. - The current interest rate corridor has a width of 240 basis points, which has led to instances where market benchmark rates significantly deviate from policy rates, weakening the guiding effect of the policy rates [9][10]. New Interest Rate Corridor - The proposed new corridor will have an upper limit set by the temporary overnight reverse repurchase rate and a lower limit set by the temporary overnight repurchase rate, with a reduced width of 70 basis points, a decrease of 135 basis points from the original corridor [2][10]. - The market benchmark rate may shift from DR007 to DR001, indicating a tighter control over short-term interest rates [2][12]. Implications of a Wider Corridor - A wider interest rate corridor has been criticized for allowing significant deviations of market rates from policy rates, which can lead to excessive leverage in the market [9][10]. - The corridor was established post-2015 to stabilize short-term market rates, but instances of DR007 falling below policy rates have raised concerns about its effectiveness [6][8]. Challenges in Adjusting the Corridor - Adjusting the corridor involves potential challenges, such as the impact on market expectations and the need to balance the upper and lower limits effectively [4][11]. - The central bank may face difficulties in incentivizing banks to lend to the real economy if the excess reserve rate is raised, as it could lead to a preference for holding funds at the central bank [11][12]. Future Developments - The central bank has indicated that narrowing the interest rate corridor is essential for clearer communication of monetary policy objectives and enhancing the guiding role of policy rates [10][12]. - The new corridor structure has already begun to take shape, with the market benchmark rate now fluctuating within the newly defined limits, indicating a more effective monetary policy transmission mechanism [12][14].