photo: Gennady Cherkasov
After almost a year pause in the Central Bank of Russia lowered the key rate by 50 basis points to 10.5%. The Central Bank explained the decision by increased confidence in the reduction of inflation. Annual inflation stabilized at 7.3% and the average for the last three months — about 5%. Last week for the first time this year, Rosstat recorded zero weekly change of consumer prices.
CB does not expect a pronounced effect of the exchange rate and growth in regulated prices and tariffs to inflation (in the second quarter inflation restrained the strengthening of the ruble, and the indexation of tariffs in 2016 will be lower than last year). In addition, according to the regulator, low demand and moderately tight monetary conditions do not give rise to inflationary pressures. The Bank of Russia lowered the forecast of inflation by the end of this year to 5-6% and to 4% by the end of 2017.
Recall that the key rate is the main monetary policy tool of the Central Bank. Under her control Bank loans. The indicator influences the formation of interest rates on loans to credit institutions, as well as inflation and exchange rates.
At a press conference following the meeting of the Board of Directors of the Central Bank, the head of the Central Bank Elvira Nabiullina said that the current decline in the key rate cannot be called a beginning of a cycle of monetary policy easing, but the potential for further rate cuts there. The regulator believes that inflationary risks remain. “This is mainly due to the inertia of inflationary expectations, the lack of a medium term strategy of fiscal consolidation, uncertainty of parameters for further indexation of salaries and pensions”, — consider in Bank of Russia. Representatives of the Central Bank in recent times has repeatedly stressed that in the conditions, when the Treasury finances the budget deficit at the expense of the Reserve Fund and thereby contributes to the formation of structural surplus liquidity in the financial sector, not the time to ease monetary policy.
Financial market calmly reacted to the actions of the regulator, even on REPO transactions nothing happened. “The reduction of the key rate to 10.5% was expected,” — said the head of Department of operations on the Russian stock market IR “freedom Finance” George Vashchenko. — First of all, inflation declined steadily for 4 months. Secondly, in the money market there is no hype, the liquidity situation of equilibrium, bond rates have long been below the previous key on the same of 0,5%. This is due to the fact that new deposits of state-owned banks are on average about 7% and these banks have no problems with raising funds. The main stabilizing factor was the increase in oil prices and the ruble and weaker than expected”.
Head of marketing strategy and research at VTB24 Dmitry Lepetikov expects the decision of the Central Bank will further lower interest rates on loans and deposits. “This year, according to our forecasts, interest rates on deposits of individuals will fall by an average of 1-1,5 PP, in the following a further 1-2 percentage points for interest Rates on loans will behave the same way,” — said the expert. According to him, the market formed a strong expectation that the key rate will go down and the end of the year will reach 9.5% per annum.
The next meeting of the Board of Directors of the Bank of Russia on the key rate, will take place on July 29. It is obvious that further steps of the Central Bank in this direction will mainly depend on how disperse the forecast of inflation and real values.Related posts: