The Central Bank has kept its key interest rate and told about foreign exchange interventions


The Bank of Russia first in this year meeting of the Board of Directors has retained, as expected, the key rate at 10% per annum, is spoken in the message of Bank of Russia.

The controller maintains the rate at 10% since September 19, 2016, when it was reduced by 50 b.p. with 10.5%. While at the previous meeting on 16 December, the Central Bank has adjusted the wording of the signal about the future, pointing to the possibility of lowering the key rate in the first half of 2017 ( and not the first or second quarter of 2017, as promised before).

However, the Central Bank on Friday, February 3, for the first time details commented on the beginning of purchase at the request of the Ministry of Finance from February 7 currency market the volume of additional oil and gas revenues in excess of actual oil prices budgeted at $40 per barrel. Until now, the regulator pointed out that the Bank of Russia “maintained a floating exchange rate regime, meaning the rejection of foreign exchange intervention to influence the nominal exchange rate of the ruble.” He also noted that the conduct of the Ministry of Finance of the foreign exchange market does not preclude the achievement of the inflation target of 4% by the end of 2017, and the impact of these operations on the formation of liquidity in the banking sector he called “near neutral”.

Market participants polled expected that the Central Bank may delay next rate cut until the second quarter. They connected it with the expected weakening of the ruble in connection with the commencement of currency interventions. This, in turn, their concerns can slow the decline of inflation to the target value.

According to the latest data of Rosstat, inflation for the week from 24 to 30 January 2017 amounted to 0.1%. Thus, annual inflation on January 30, decreased to 5.1%. Inflation in 2016 was minimal for all history and amounted to 5.4%.

Source