Abstract: Financial cycle plays a crucial role in the regulation of monetary policy. Accurately identifying China's unexpected monetary policy and exploring the relationship between unexpected monetary policy and financial cycle can provide new ideas for monetary policy reform, which is also conducive to the optimization of monetary policy and the healthy development of the financial system. By making use of the characteristics of the spread changes between fixed rate bonds and floating rate bonds before and after the monetary policy announcements, this paper identifies China's unexpected monetary policy with the Proxy SVAR model. Then based on this, it explores the impact of the unexpected monetary policy on the financial cycle. The findings of the empirical study show that an unexpected monetary policy shock that increases the broad money supply by one standard deviation will lead to a 0.06% rise in the financial cycle, that the explanatory power of unexpected monetary policy shocks on financial cycle fluctuations is about 30%, that the impact of unexpected monetary policy on the financial cycle will be realized through financing and expected channels, and that the current monetary policy regulation presents the characteristics of counter-cyclical and cross cyclical regulation of the financial cycle. Therefore, the People's Bank of China should further improve the early warning management mechanism, pay close attention to the changes in the financial cycle, improve the counter-cyclical and cross-cyclical adjustment of monetary policy, optimize the communication and coordination capacity, and promote the virtuous circle of financial stability and stable economic development.

Key words: financial cycle, monetary policy, fixed and floating interest rate spreads