The Bank of Russia on Friday, 10 June, lowered its key rate by 0.5 percentage points to 10.5% per annum. It was the first time since the summer of 2015. The Central Bank explained its decision, first of all, “confidence in the sustainable reduction of inflation”. Improvement in economic activity is no pressure on consumer prices and inflationary expectations of the population and business continue to decline, explained the regulator. Estimates of inflation by the end of 2016 is reduced to 5-6%.
How does business respond?
“A positive attitude, but I would like more”, — says CEO and co-owner GK “the Trading house “the Family” Oleg Ponomarev. – Now rates for short loans to us about 12,5-13,5%, it kills the business, gives us razvivatsa”. The Central Bank’s decision he calls “a step in the right direction, but still insufficient.”
Business been waiting for this step of the Central Bank and now hopes that the regulator will continue to reduce the rate further. “It’s a small drop. But it’s better than nothing. Our economy needs to lower the price of the loan”, – the President “Euroset” Alexander Malis. Reducing the cost of Bank loans – the main effect, which calculates the business, agrees co-owner of LUKOIL Leonid Fedun. Rates for business at the level of 13-15% and a mortgage at 10% per annum — the “heavy lifting” for the most part of entrepreneurs and the population, he said: “With such a mortgage in 20 years the buyer actually has to pay three of the price”. “For companies our group rates are now at the level of 16-18% per annum, of course, we would welcome the lowering of rates”, – says CEO of the holding “Sovtransavto Vladimir Chan.
“Those who come for such expensive money, the banks themselves are considered crazy,” says the owner of the sites Fabrikant.ru and Superjob.ru Sergei Gabestro. – Most of the business plans formed by entrepreneurs, just impossible, since all production has risen significantly. In order to reverse the situation, the Central Bank should lower the rate by 0.5 percentage points once a week”.
But the opinions of businessmen on account of the fact whether the Central Bank actively to reduce the rate and then dispersed.
Friday’s rate reduction suggests that the “economy is gradually emerging from the crisis, and the inflation target of 4% becomes a reality optimistic Fedun. – Never in the history of Russia did not have such low inflation”. “Balances on deposits are rising, inflation is close to zero, banks have a lot of money,” Ponomaryov enumerates the arguments in favor of easing of the Central Bank.
According to Fedun, “for the normal development of the economy and the base rate should not be higher than 6%”. This year it will not happen, but, “if you set a goal and make it to the end of 2017, it would be very beneficial for the economy,” he said.
While the business is given only to a positive signal, but it is difficult to expect the further easing of the Central Bank this year, doubts the managing partner of the group of companies nmgk Ivan Sydoruk. “Serious reversal of the situation in order that the budget had more money, we do not observe,” he says. – Played a little bit of oil to $50, which probably also affected the decision of the Central Bank. And populist is a right step, but practically it will bring nothing”.
“A decline of 0.5 percentage points – is too little, said Gabestro, the whole business of waiting for a decline of 3-4%, and I very much hope that this decision of the Central Bank – not an event”.
Conttains whether the Central Bank to lower the rate?
The rate reduction does not mean further easing of monetary policy, but the potential for reducing the rate is, said at the Friday press-conference the Chairman of the Bank of Russia Elvira Nabiullina. The Bank of Russia will maintain a “balanced approach,” she added.
This is the beginning of a new cycle, I am sure chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin. In his opinion, if further inflation dynamics will be positive, the Central Bank will continue to lower the rate. He predicts that in the absence of a sharp deterioration in external conditions and a stabilization in oil prices by the end of the year, the Central Bank will reduce it to 9%
Rate will decline, as the decline in inflation, the Central Bank in its actions will follow the price increase, not ahead of it, says chief economist BCS Vladimir Tikhomirov. With annual inflation of 5-6% it also expects a rate cut to 9%.
“Taking the first step, the regulator has opened the way to further lower interest rates”, — agrees the head of the dealing center of Metallinvestbank Sergey Romanchuk. Analyst at Sberbank CIB Tom Levinson believes that in the absence of external shocks and the compliance of the inflation forecasts of the Central Bank regulator by year-end will lower rates even more — up to 8.5%.
The following reduction may occur in the third quarter of this year, said the chief economist of the National rating Agency Maxim Vasin. “We reiterate our annual Outlook on the level of rates to end the year at 8.5-9%,” — he said.
But then a sharp decline in betting experts do not expect. The CBA in a Friday press release warned that risks of inflation in 2017 will not reach the target level of 4% is saved. The main reasons are the lack of medium-term strategy of fiscal consolidation and uncertainty about the future indexation of wages and pensions, said in a press release of the regulator. Negatively on inflation expectations could be influenced by the volatility in oil and financial markets. Realization of these risks may cause slowing of the process of reducing inflation, says the Central Bank.
BCS forecasts that with inflation at 6% rate at the end of 2017 will reach 8%. Kuzmin of Renaissance Capital” expects that by this time it drops to 7%.
How the decision will affect the ruble and Bank rates?
The Central Bank decision is a signal to market participants wishing to take a position on the ruble, now is the time, says Romanchuk.
The decrease in rates on Friday caused a jump in exchange rates on the Moscow stock exchange. Immediately after the news the dollar and the Euro rose against the ruble by about 20 kopecks. At a minimum cost of €1 dropped to a mark of 72.48 RUB 27 kopecks below the closing level of the previous trading session and 84 kopecks. less than high hit on Friday morning. Simultaneously, the dollar was close to 64 rubles, losing about 80 kopecks compared to the morning maximum. At the peak of the fall of the dollar fell to 64,1075 RUB 22 kopecks. below the level of the previous trading session.
The optimism of the players fell after a press conference Nabiullina, who warned that Friday’s Central Bank decision does not necessarily mean a rate cut in the future. For 19.00. GMT the dollar strengthened to 64.84 RUB, EUR — RUB to 73,16
Analysts polled doubt that the effect of the rate changes will be long-term. “Reducing rates will not have a material impact on the ruble because it is already considered by the market”, — said the chief economist of the Eurasian development Bank Yaroslav Lissovolik. He believes that the dollar is now balanced at the level of 65 rubles to the dollar and in the next few months will remain at this level (read more about the forecasts of experts on the ruble read here).
After the decision of the Central Bank to lower its key rate to 10.5% for four of the 20 largest Bank — “Russian standard”, ICB, ROSBANK and “Binbank” — said it was ready to review its policy regarding interest rates for customers. But the changes will be small, warned the representative of “Russian standard”.
The process of reducing interest rates on loans and deposits will begin in the second half of 2016, says head of marketing strategy and research at VTB24 Dmitry Lepetikov. In his opinion, to the end of the year Deposit rates for households will fall by an average of 1-1,5 p. p. The same forecast of the head of the Duma Committee on economic policy Anatoly Aksakov.
Sberbank has reduced rates on loans potrebitelski 1.1–4.1% more may 16, from 10 June, the Bank promised to reduce interest rates on loans to businesses by 0.5 to 2.25% per annum.
Now the average rate on all segments of the credit is about 14% (+3 percentage points to the previous key rate), says principal analyst Michael Bernbach Matovnikov. In his opinion, it may decrease the max at the same 0.5 p. p. that the rate of the Central Bank.
But on Deposit rates the decision of the Central Bank have almost no impact. Pause with a reduction in the key rate was too long and the current decline is too small to for something any noticeable influence, says Matovnikov. “Deposit rates strongly pulled away from the key — and will continue to decline without looking at her. The exception may be middle-sized banks that still attract deposits at 11% per annum and above”, — said the expert. However, such proposals very little, therefore, on the level of market rates, their adjustment would have no impact.
With the participation of Polina Roseway, Natalia Suvorova, Sergey Titov, Natalia Telegina, Nikolai Grishin