The consensus forecast: fiscal risks will not allow the Central Bank to lower the rate

The consensus forecast: fiscal risks will not allow the Central Bank to lower the rate

MOSCOW, January 28. correspondent Alina Yevstigneyeva/. The Bank of Russia on 29 January for the fourth time in a row will keep its key rate unchanged at 11%, sure all 15 analysts polled by TASS. Economists do not exclude the possibility that the regulator may toughen rhetoric and to cancel its earlier promise “to lower the rate on one of the next meetings”.

They also affect forecasts on cheaper loans to the end of the year and raised its forecast for inflation.

From the beginning, the ruble has weakened against the dollar by 13%, Brent crude – by 15.4%. “Against the background of observed last week volatility of the ruble rate should have increased to 13%,” – says a leading expert of the “Center of development” HSE Mykola Kondrashov.

However, a week before the meeting of the Board of Directors of the Central Bank at the rate oil prices played a few drop and started active sales of foreign currency by exporters, which somewhat stabilized the national currency and has almost zeroed the chances of a rate increase.

According to the Director of the CYI Sberbank of Julia tsepliaeva, the controller will not come on a throat to an own song and will not raise the rate, “unless there is something quite extraordinary, to which I attribute the panic of the population, runs on banks”. Such a panic, she said.

The crisis is again in the foreground

Retention of financial stability and budgetary discipline is today number one goal for the Central Bank and the government, as actively said Elvira Nabiullina and Anton Siluanov at an unscheduled Board of the Ministry of Finance a week before the meeting of the Board of Directors of the Central Bank.

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The financial system of the Russian Federation stands in front of a group of powerful challenges: simultaneously rising inflation expectations (16.4 per cent against 15.8 per cent the previous meeting), there is a threat of shortfall of trillions of budget revenues due to the fall in oil prices, and growing risks of deepening recession (the IMF forecasts a decline of GDP by 1%, the MAYOR at oil prices of $25 per barrel forecasts an economic contraction of 3.7%).

In these difficult circumstances, “the ability to survive is a test of the maturity of the Central Bank and the Finance Ministry”, said Nabiullina.

The head of the Bank of Russia gave to understand that the Central Bank will be difficult to keep inflation under control during risky fiscal policy. She urged the Finance Ministry to keep low the budget deficit and level of debt.

In addition, it is important for the Central Bank, the Reserve Fund and national wealth Fund, as well as a standstill budget spending, which accelerates inflation. While the amendments to the budget for 2016 is not submitted, the fiscal risks for the Bank of Russia is significant. After the appearance of certainty with the budget, the Central Bank will also be better able to determine the vector of monetary policy.

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“In the current situation, the source of inflation are structural imbalances in the economy, there is a mismatch of income and expenses budget,” says economist at Credit Suisse Alexey Pogorelov.

The Central Bank has already given a signal that monetary policy can be tightened. “Inflation risks have recently increased. This basically means that the trajectory of monetary policy will be somewhat tougher than previously expected,” – said in a recent interview with Bloomberg first Deputy Chairman of the CBR Ksenia Yudaeva.

The stress scenario the Central Bank of the Russian Federation, which assumes oil prices of $35 per barrel, provides the possibility of a rate hike. Now oil prices are even below this level – about $29 per barrel. However, to raise the regulator will prevent first of all the General line of his policy since the beginning of last year to support economic growth. The market and business are not ready to raise rates.

Chief economist at Alfa Bank Natalia Orlova with the fiscal argument, I agree, however, believes that his influence is more manifest in the 2nd half of the year.

“No matter how the situation with the sequester, the first half will be tougher than the second. In the second half of the year we are approaching parliamentary elections. The first half from the point of view of execution of budget expenditures will be quite tough. Now the topic of fiscal risks is not the most relevant, but certainly it will be relevant since the summer,” she says.

The ruble is not so important

Ironically, the sharp depreciation of the ruble is unlikely today for the Bank of Russia an argument to raise rates. Let’s remind, a powerful inflationary wave in the background of the devaluation in December of 2014 was the occasion for an emergency rate hike to 17%. Since the last rate meeting on (December 11), the ruble has weakened against the dollar from 69.2 rubles/$ to 81.8 rubles/USD.

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Commenting on last week’s question on the ruble, Nabiullina said that finds him close to the fundamentally justified.

“Pressure on the ruble no, there is just low oil prices that lead to growth of yield on the main ruble-denominated money market instruments,” explains the head of the Bank Dmitry Zavyalov.

However, in the conditions of a new devaluation, the Central Bank may revise its optimistic target for inflation at 4%, does not exclude the Deputy Director of the center for macroeconomic forecasting of the Bank Natalia Shilova.

“In such a situation for the Central Bank the main risk is that inflation by the end of the year Outlook due to the higher ruble exchange rate that could jeopardize the achievement of inflation target in 2017,” she says.

Until the second half, while the effect of the weakening of the ruble is not fully affect inflation, should not expect from the regulator a rate cut, experts say.

“We believe that the “transfer effect” from the devaluation of the ruble will be implemented in the 2nd quarter. At the end of the year we forecast inflation at 9.2% and there is a high probability that the easing of inflationary risks will allow the Central Bank to resume its cycle of rate cuts”, – says Deputy head of Department of the analysis of market conditions of Gazprombank Gulnara Hidersine.

Kondrashov HSE estimates the inflation at the end of the year at 9%, Savchenko from Nordea was 8.8%. The official forecast of the Central Bank is considerably lower – about 5.5 to 6.5%. It is possible that the regulator will revise it on Friday, January 29.

According to the analyst “URALSIB capital” Irina Lebedeva, to lower the rate, the regulator could only stabilize oil prices, which is not happening because of the “mad growth stocks” in the United States.

“The relative stability of the ruble is still important for the Central Bank. To create additional risks in the plain nothing,” she explains low probability of a rate cut.

Business, and analysts expect rates. As previously explained to journalists by the President of “OPORA Russia” Alexander Kalinin (which according to unofficial sources were met with the first Deputy Chairman of the Central Bank Dmitry Talinum), in January it makes no sense to lower the rate, “because December and January are traditionally the biggest months of speculation in the foreign exchange market”.

Member of the Presidium of the General Council of “Business Russia” Anna Nesterova also does not expect changes in the key rate. “I do not see that the regulator can move to lower the key rate in the near future. This will be possible, if we see long-term (2-3 months) stabilize prices for Brent crude above $32 per barrel. That is why, while certainty as to the future prices of oil prices, the Central Bank will leave rates unchanged” – predicts it.

Analysts ‘ forecasts

Company – Analyst – Forecast


Credit Suisse Alexey Pogorelov – 11

The Bank Natalia Shilova – 11

UniCredit – Bangaram Arkhipov – 11

UBRD – Dmitry Zavyalov – 11

Gazprombank – Gulnara Hidersine – 11

HSE Mykola Kondrashov – 11

CYI Sberbank Yulia tseplyaeva – 11

Alfa-Bank Natalia Orlova – 11

Nordea Bank Dmitry Savchenko – 11

ING Dmitry Field – 11

VTB Capital Alexander Isakov – 11

Renaissance Capital -11

Sberbank CIB -11

MC “ronin trust”- Andrey verholantsev – 11

URALSIB Capital – Irina Lebedeva – 11


The average value of the forecast – 11.

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