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Saturday, December 3, 2016

The government believes the falling inflation


Representatives of the Ministry of Finance and other government experts unexpectedly bumped into a positive. The Deputy Minister of Finance Maxim Oreshkin said that inflation for this year will be 5.7%, not 6% as previously thought. The same opinion is shared by German Gref. It is a historical minimum. Even in the fat years, inflation has at best fluctuated around 9%. Moreover, according to Oreshkin, in 2017 the state is quite capable to bring down inflation to 4%. It can not but rejoice. We’re all tired from galloping price increases. But there is a suspicion that the Finance Ministry is wishful thinking. As approves the same., his Department has a stress scenario, according to which the price of oil falls to $30. Then inflation again accelerated to double-digit numbers.

Many experts at the beginning of the year, said that 2016 will become for our country a year of testing. The decline in real income in Russia continues for 21 consecutive months. In July the rate of decline (after a slight slowdown to 4.8% in June) accelerated to 7%.

But officials believe that it is not necessary to lose heart. They say that a bright future is almost here. All mainly depends on inflation. At the beginning of the year, officials of relevant departments said that the price increase will be approximately 6-6,5%. But in the early fall of their predictions have become much more positive. As stated by the Deputy head of the Ministry of Finance Maxim Oreshkin, the experts of his Ministry at the end of this year expected inflation at 5.7%. “This is a historic low of inflation in Russia”, — says Oreshkin.

Indeed, the best from a financial point of view, the years for Russia, the inflation in our country was at the level of 10-11%. To a minimum it was down in 2009-2010 was 8.8%.

Now is 5.7%. And this in terms of sanctions and the financial crisis. Moreover, Oreshkin not the only one who speaks of a sharp decline in inflation. The head of one of the largest Russian state banks, German Gref also allows inflation below 6% by the end of 2016. Moreover, both admit that in 2017, consumer price growth will not exceed 4%. “Less and less doubt that this goal is achievable in the next year”, — says Oreshkin. “The Chairman of the Central Bank Elvira Nabiullina will be able to reduce inflation to 4% a year” — echoes Herman Gref.

By the way, in these developments and believe foreign investors. According to American rating Agency Fitch, although to reach the goal of 4% (inflation) by the end of 2017 Russia will be extremely difficult, but “to approach the figure it is possible”.

Given that officials close to them, and experts believe such a good scenario, then there is hope for the progressive reduction of the key rate by the Bank of Russia, and, in the near future. A regular meeting of the Board of Directors of the Central Bank on this issue will take place on September 16. The last time the regulator cut the rate on 6 June this year. Now she is 10.5% and most experts believe that this time it will be reduced by 0.5%.

This trend promises to continue. After all, if inflation is reduced, it is not necessary that the key rate is much higher than the level of price increases. In most developed countries, the key interest rate in fact equals the inflation rate. Moreover, in some States, such as Germany, where annual inflation in recent years, does not exceed 1-2%, the key rate lowered to 0%. In Japan, where deflation, rate is negative in General.

On the same way trying to go and Russia. According to conservative forecasts, to the end of the year the key rate in our country will be reduced to 8.5% -9%. But there are experts, for example, of the Stolypin club, who insist on the reduction of the rate to 7-8%.

Of course, movement in this direction is a good thing. Policy of the European Central Bank aimed at maintaining low key interest rate, has allowed the Eurozone countries to save €50 billion.

But will Russia be able to afford it — is not clear. According to the same Maxim Oreshkin, the Finance Ministry has a stress scenario, which implies a decline in oil prices to $30 per barrel. “Do not rejoice very current oil prices. As soon as we see the correction in other markets, it will affect the oil market, especially considering that fundamentally in the commodities market is still a lot of problems,” — said the Deputy Minister.

Direct correlation: “the oil price — exchange rate — inflation — the key rate” — is obvious. Therefore, even if the Central Bank at the next meeting and will consistently reduce the rate, then it is possible, then what will be the rollback and this figure will jump again thoroughly and in December 2014 will increase by a few percentage points.

 

Sanctions . Chronicle of events
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