The Board of Directors of the Central Bank on April 28 decided to lower the rate by 0.5 percentage points.
In a recent Board of the Ministry of Finance, Central Bank head Elvira Nabiullina did not rule out discussion on lowering rates by 25 or even 50 basis points, says analyst “Discovery Broker” Andrei Kochetkov. Accordingly, the Board of Directors of the regulator before the meeting was confident that monetary policy will change, he said.
Inflation is slowing faster than forecast — according to the statement Nabiullina, dated 20 April, annual inflation in the country slowed to 4.1%, says Kochetkov. In these circumstances, the regulator may gradually move from containing inflation to stimulating economic growth, he said. “However, one should not unnecessarily give in to optimism, since the growth of prices in Russia may very suddenly speed up. So the regulator will exercise caution at each subsequent meeting,” — says the analyst.
Apparently, the current low inflation is found to be more stable than it was before, and it is due not only to temporary factors, explains the regulator’s decision, a senior analyst at research and forecasting ACRES Dmitry Kulikov.
So, three and a half months accumulated only 1.2% inflation, says Kulikov. At the current conjuncture, the main factors of inflation taking into account seasonality, this corresponds to around 3.6% for the year, calculates the expert. Thus, at this point created a “reserve” that will allow to achieve the inflation target even under less favourable market conditions for the remainder of the year, says the analyst of an ACRE.
The rate reduction is in General absolutely entrenched trend following the observed inflation and inflation expectations, said Kulikov.
Today’s rate reduction is not a strong signal to the market — it only confirms that the Central Bank and the market perceive reality the same way, the head of operations on money and FX markets “Metallinvestbank” Sergey Romanchuk.
If the current pace of decline in inflation expectations and the absence of force majeure Dmitry Kulikov of an ACRE expect three cuts in the current year values by 0.5 PP to 8.25%. “This forecast is based on reported by the Bank of Russia the benchmark for the equilibrium real interest rate,” he says.
The impact on the population
The specific solution to a lesser degree affects Bank rates, says analyst Dmitry Kulikov ACRE. According to Sergey Romanchuk, banks has caught the trend on reduction of the key rate ahead of the action of the Central Bank. “Client driver rates is the market situation, not the Bank of Russia. Besides a more rapid decline in Bank interest rates contributes to surplus liquidity from credit institutions there is no need to obtain refinancing from the Central Bank”, — emphasizes Romanchuk.
Can only change some of the lending rates that are tied to the key rate, but this applies to corporate borrowers, said the chief economist of consulting company “PF Capital” Evgenie Nadorshin.
However, the lower rates will reduce the willingness of the population to save in rubles, said Kulikov. “But if inflation expectations are falling faster than interest rates on savings instruments, it is possible to reverse the situation,” he says.
While inflation expectations of financial analysts and the population is in a different range. So, financial analysts are expecting year-end 4.4%, and the population is about 11%, said Kulikov. As noted Romanchuk in order to anchor the inflation expectations at the level of the inflation target, it will take several years. “The population remembers everything that happened with prices for decades,” he adds.