MOSCOW, December 11. The Board of Directors of the Bank of Russia on the last in this year meeting, kept its key rate unchanged at 11% for the third time in a row amid increased inflation risks due to Turkish predamage, the slowdown of the Chinese economy, the implementation of the “Plato” and other risks. Thus, the rate remained unchanged since August 3 this year.
The consensus forecast: the CBR will have to make the hardest decision rate for the year
The decision of the Bank of Russia has coincided with expectations of analysts. 11 of 16 respondents on the eve of the meeting of experts predicted saving rates. Still five experts had expected that the regulator will make a new year’s gift to business and return rate to the level to interest rate shock December of last year to 10.5%. At the briefing the head of the Bank of Russia Elvira Nabiullina promised that one of its next three meetings (29 January, 18 March and 29 April) when the inflation forecasts.
To keep the ruble
Explaining the decision of the Central Bank, the managing Director of Arbat Capital Alexey Golubovich said that the Bank of Russia should weaken the ruble in traditionally difficult for him the new year period. “Plus before the New year, people have nowhere to go, people do not buy the currency, because they don’t need to travel abroad. Hence the ruble slightly strengthened. Not to break this trend – you need to leave bet. There are some macroeconomic explanation, but actually, the reasons here are,” he said, adding that the decision was expected for all. Was expecting such a decision and the former head of the Ministry of Finance, the head of Committee of civil initiatives Alexei Kudrin, who wrote in the personal microblog on Twitter: “the Central Bank has kept its key interest rate to 11%. Informed decision”.
Nabiullina: the probability of keeping oil prices below $50 per barrel rose
“We were expecting a rate cut of 50 basis points, but in the last days, when the ruble depreciated strongly, and weekly inflation came to 0.2%, and we were ready to such decision of the Central Bank. Overall I think this is a good solution, it is clear that this will increase the degree of credibility of the Central Bank”, – said the chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin.
The business was dissatisfied with the decision of the Central Bank. “The Central Bank is struggling with monetary inflation, and we don’t have it… We believe it (the Central Bank’s policy – approx. ed.) has a negative impact on economic growth. Today still credit resources is very high compared with our competitors from other countries”, – said business Ombudsman Boris Titov. He proposed to reduce the key rate and to lead an active monetary and industrial policies, make available resources for investment projects and reduce dependence on imports and reduce costs of doing business. In his opinion, the key rate must be equal to the average rate of profitability, which in Russia is 4-5%. According to golubović, monetary inflation, the Central Bank creates itself it is fighting.
The decision to keep rates unchanged made primarily on the basis of inflation risks, which are very concerned about the Russian Minister. The thesis is not fast enough decrease in inflation is reflected in the press release of the regulator, and in her speech. “As for consumer prices, here the dynamics were somewhat worse than our expectations. Actual inflation is calculated on the level of the upper border of our forecast,” he said. The release also noted that the inflationary expectations of the population in November increased, although it was expected a decrease.
According to the Bank of Russia, the impact of the implementation of the “Plato” and ban products from Turkey will have little effect on inflation. The principal source of inflation risks remain the fall in oil prices, increasing interest rates the US Federal reserve and the continuation of the slowdown of the Chinese economy. In addition, inflation can inhibit the preservation of inflation expectations at an elevated level for a long time, the revision scheduled for 2016-2017 rate of growth of regulated prices and tariffs, indexation of benefits, and overall easing of fiscal policy.
Chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin calls two reasons of growth of inflation risks and inflation expectations in November. “The first is the weakening of the ruble. The second is information noise about “Plato” and the embargo on food imports from Turkey, ” he said. Kuzmin agreed with CB that the latter two factors have a very limited effect on inflation directly, but they could affect inflationary expectations quite quickly and strongly.
According to the chief economist FG BCS Vladimir Tikhomirov, the main reason to keep the rates that were external factors. This renewed trend for reduction of oil, which is observed all last week, and rising geopolitical and economic risks associated with the middle East and the General state of the global economy. “These external factors: oil, geopolitics and the global economy played a defining role in today’s decision of the Central Bank”, – he added.
The next meeting of the Board of Directors of the Central Bank rate will be held January 29.
Bobaraba Maria, Alina Yevstigneyeva, Nikita Zharkov