The Bank of Russia for the first time in six months reduced the key rate

The Board of Directors of the Bank of Russia at its meeting on 24 March had decided to lower the key rate to 9.75%. The regulator lowered the rate for the first time since last September, when it dropped from 10.5%.

The Central Bank will assess the future dynamics of inflation and the economy in relation to the forecast and allows for the possibility of gradual reduction of the key rate in 2Q-3Q of 2017, said in the comments of the regulator.

Market participants are waiting for a detailed review of the Bank of Russia. At 15:00 GMT scheduled press conference of the Chairman of the Bank of Russia Elvira Nabiullina where she will comment on the results of the meeting and will outline the future actions of the regulator.

The Central Bank also on Friday will report on monetary policy, which will give a forecast on key economic parameters (inflation, oil price, GDP). In early February, Elvira Nabiullina reported that the Outlook for oil price in the baseline scenario, which included the price of $40 per barrel, will be increased.

If in the run-up to the previous few sessions the market unanimously predicted saving rates, this time the opinions of the participants about the actions of the regulator at the rate of went. Thus, of the 19 banks surveyed, the preservation of the rate of expected a little more than half — 11, — while eight predicted lowering rates by 0.25–0.5 p. p. While all participants expect a softening of rhetoric of the regulator on the future direction of monetary policy.

The market was divided into two “camps” due to the fact that between the arguments for and against reducing the rate of the sprung balance. On the one hand, a sustained slowdown in actual inflation since the beginning of the year, the strengthening of the ruble and the recent verbal intervention from the Bank of Russia (9 March, the head of monetary policy Department, Bank of Russia Igor Dmitriev said that the regulator may consider a rate cut at the March meeting) gave analysts a reason to revise their forecasts downward rates, as did, in particular, Sberbank CIB and “VTB Capital”. On the other, continued high inflation expectations — a key factor underpinning the regulator in the decision-making process about the level of the interest rate risks of further decline in oil prices and the expected rise in the fed rate.