The real sector has the potential to become a growth driver of the Russian economy. For this purpose the Bank of Russia should lower the key rate by 2% to 8.5% per annum. With this request in a letter (copy available to the “MK”)appealed to the head of the Central Bank Elvira Nabiullina, first Deputy Chairman of the Duma Committee on economic policy, innovative development and entrepreneurship Mikhail Emelyanov. Thus, domestic entrepreneurs will be able to raise funds for production development. Support these proposals and independent experts. According to them, now there are preconditions for the reduction of the key rate — slowing inflation. As recent months, this indicator is improving and is moving toward the desired goal — to slow inflation next year to 4%.
photo: Gennady Cherkasov
The fact that at a time when inflationary expectations in the country are falling, real interest rates remain prohibitively high to raise funds by domestic companies. And financial institutions prefer to place the money in the accounts of the Bank of Russia. So, for the last time on deposits Central Bank funds of credit institutions 350-450 billion.
Therefore, according to the first Deputy Chairman of the Duma Committee on economic policy, now the real sector the necessary impetus. First of all, we are talking about the reduction of the key rate from the current 10.5% to 8.5% per annum at the regular meeting of the Board of Directors of the Bank of Russia which will take place on September 16. “The key rate to 10.5 percent does have a detrimental effect on the possibility of financing for small and medium businesses, as a result of Bank loans to enterprises are granted at least at 25-30% per annum. Such a large percentage, coupled with a large number of bureaucratic procedures and documentation that makes obtaining a Bank loan to small and medium enterprises difficult to implement. Meanwhile, these businesses can boost economic growth, provide jobs and solve the problems of unemployment, low incomes and spur domestic demand. If the rate will remain high, there is a risk to get into the so-called stagflation: the situation in the economy when the country shows zero or negative GDP growth amid high inflation,” — says “MK” the General Director of “Mani Fanny” Alexander Shustov.
As emphasized by leading analyst GK TeleTrade Alexander Egorov, now there are all preconditions in order that the Central Bank decided to lower the key rate. “The politics of a mega-regulator is based on the expectations and indicators of inflation so-called inflation targeting. In recent periods, this indicator has consistently improved and moved to the desired target level of 4% in 2017”.
So that in determining the further fate of the Central Bank’s key rate will be guided primarily by the rate of inflation, according to analyst GK Forex Club Irina Rogova.
“It’s no secret that the key purpose of the regulator raises the reduce price pressures. Against this background, the current high enough level of the rate (10.5 per cent), of course, justified. However, one should not forget that the real sector for growth and development need the money. The GDP growth rate remains in negative territory (down 0.6% in the second quarter of 2016). The situation in industrial production remains fragile, indicators are not yet able to reach the trajectory of sustainable growth. Of course, for the real sector the decrease in the rate could be a factor of support. But for it to be noticeable, to reduce it should quite rapidly: at 1-2%”, — the expert believes.
However, as predicted Rogov, the regulator is likely to act in this direction gradually, fearing the risk of a significant weakening of the ruble and provoke growth of inflation.