Moscow. December 9. The Board of Directors of the Bank of Russia on 11 December will consider key rate: most analysts expect that the regulator will reduce the rate already at this meeting by 50 basis points, noting that the restriction of food imports from Turkey is unlikely to significantly change the face of inflation.
Last time, October 30, members of the Board of Directors of the Central Bank left the rate unchanged at 11%. At the same time, in a released statement called the Declaration of the future intentions of the Bank of Russia. He promised that with the slowdown of inflation in line with Central Bank estimates it will resume the reduction of the key rate on one of the next meetings of the Board of Directors. The Governor of the Bank of Russia Elvira Nabiullina has specified that we are talking about the next three Council meetings.
Slowing inflation may push the rate down
Many analysts believe that the slowdown in Russia, the rising prices enough to make the Central Bank lowered its key interest rate. Thus, the reduction of the indicator by 50 basis points expected in “VTB Capital”, Sberbank CIB, Morgan Stanley and “the Renaissance the Capital”.
“The latest data (for November), as expected, revealed the slowdown of annual inflation from 15.6 per cent in October to 15%. This is due to a high base last year, when inflation accelerated due to the strong effect of the weakening of the ruble”, – the experts of Sberbank CIB. Analysts believe that the trend of slowdown of inflation will last for several months, and in March, annual inflation in Russia will reach the level below 8%.
In “VTB the Capital” note that a more significant slowdown in inflation is not a prerequisite for a rate cut, but rather its conformity to the forecast of the Central Bank at the end of the year is 12-13%.
“The effect of last year’s weakening of the ruble and the imposition of import restrictions gradually disappears: from August to 15.8% in November, the annual inflation rate fell to 15 per cent,” analysts estimate “of”VTB Capital” effects grocery contracti.
In Gazprombank believe that the Central Bank will leave the rate unchanged, at the same time, analysts of Bank write that the market still expects a rate cut: this is evidenced by the excess of the current indicator value over the medium-term profitability and long-term OFZs at 100-150 basis points.
In addition to declining rates of rising prices, the Central Bank’s decision can be influenced by the factor necessary to support the economy. The Minister of economic development Alexei Ulyukayev said on December 1 that he sees the potential to reduce the key rate. At the same time, commenting on the restriction on the import of Turkish goods, the Minister noted that this decision should not affect the policy of the Bank of Russia, since the policy of inflation targeting is associated with the monetary factor affects core inflation. Assessment speaker, the fluctuations associated with short shocks the proposals should not be considered in this situation.
In the review of Sberbank CIB notes that the most serious argument in favor of easing monetary policy is “the weak economy of the country.”
“Despite the improvement in the dynamics of industrial production and investment in recent months, the consumer sector remains under pressure. In October, the pace of annual decline in real wages and retail trade turnover was double digit (respectively 10,9% and 11,7%)”, – the experts of Sberbank CIB. They also predict that given the high base, which appeared on the background of the surge in consumer activity at the end of 2014, is unlikely to improve the situation in the last two months of 2015. German Gref, head of Sberbank including Sberbank CIB, speaking at the Federation Council on Wednesday, said that waiting for further lowering interest rates on Central Bank operations. Obviously, that meant including key rate of the Bank of Russia.
Analysts “the Capital Renaissance” in its review noted that in favor of the decision to reduce rates at the next meeting to speak of the fact that restrictions on food imports from Turkey is unlikely to materially change the inflation picture and would add only 0.2 to 0.3 percentage points to the index of prices in the coming months.
Continued betting against instability
While most experts are expecting a small rate cut by the Central Bank, some analysts still predict preservation of indicator unchanged due to still high inflation risks, the contribution of which would limit the import of Turkish products in Russia.
Saving rates are expected in Raiffeisenbank, BNP Paribas and Gazprombank. Experts of the latest release a number of factors in favor of your forecast. This is a high probability of a rate hike by the fed in December, the seasonal growth of devaluation expectations in Russia that historically observed at the end of the year, pending inflationary risks associated with a temporary reduction in the supply of fruits and vegetables in early 2016, as well as an increased risk of growth of inflationary expectations of the population at the end of 2015.
“If the direct contribution to inflation from the rise in consumer prices due to the need of replacement parts imported into Russia of fruits and vegetables will be implemented in early 2016, the effect on inflation expectations are already evident now,” say analysts of Gazprombank. They believe that the manifestation of inflationary expectations will contribute to the limited production capacity of Russian producers in the winter and pre-Christmas demand from the population.
Also in a number of factors in favour of maintaining rates the state Bank says the growth in the money supply in connection with the issuance of currency by 1 trillion rubles in December. Assessment of Gazprombank, it will lead to an increase in inflation by 1 percentage point. on the horizon of half a year.
“VTB the Capital” although it predicts the reduction of the key rate of the Central Bank by 50 b.p., at the same time in its last review on the subject notes a number of negative factors that may deter the Central Bank from the investment Bank predicted solutions. Thus, according to “VTB Capital”, the ban on the import of Turkish products may increase food inflation by up to 0.5 percentage points In the winter period imports from Turkey account for 10-15% of all sold in Russia of fruits and vegetables, analysts estimate.
“The price increase associated with the switch to purchase from other regions, including the increased cost of delivery can be 10-50 p. p. In the end we get the range from 0.10 to 0.75 PP”, – stated in the review.
In “VTB Capital” of the negative for inflation phenomena is implementation of the fare trucks on Federal highways (payment system “Platon”). The contribution of this innovation to the analysts estimate inflation at 0.2 percentage points While the indirect effect on transportation costs for delivery of goods will lead to the final contribution of 0.07-0.3 PP.
Other factors also speak in favor of a rate cut. “VTB Capital” draws attention to the recent weakening of the ruble, which may affect the value of the goods, dependent of course, but also on the possible introduction of a food embargo against Ukraine.