The Board of Directors of the Central Bank at its meeting on 27 October lowered its key interest rate by 0.25% to 8.5%. Most experts had expected such decision of the regulator: in 2017, he spent a reduction of the key rate for the fifth time.
photo: Gennady Cherkasov
However, regarding the future policy of the Central Bank rate analysts disagree: some believe that the Bank of Russia at the next meeting will continue to ease monetary policy, while others believe that following the reduction of the key rate of the market will see after the presidential election.
Alexander kuptsikevich, FxPro financial analyst:
“This reduction is comparable to the slowdown of inflation in the past from the last meeting, the Central Bank six weeks. This is bad for the ruble, as it does not fully coincide with the expectation markets (the consensus forecast of economists expected the rates to be 8.5%). However, the last two weeks the weakening of the ruble, apparently, was associated with the expected soft policy of the Central Bank. The reaction of the Russian currency will be linked to the tone of the comment by the head of the Central Bank. In previous times, the regulator hinted that it may pause with easing due to risks of accelerated price growth in the beginning of 2018.
At the moment of the probable correction in oil and the ruble from the current very high levels. In subsequent months, inflation is unlikely to be inhibited as quickly as the current year. CB wants to take a break for a few months, to better understand the trend of inflation and to check the stability of the national currency.
While the Central Bank is not sure that inflation is entrenched at the target, it will aim to keep the difference between price growth rates and the key rate is about 5 percentage points. So in the next six months you can wait only two or three decisions of the Central Bank to lower rates 0.25%. It will also cause the weakening of the ruble”.
Mikhail Altynov, investment Director IK “Peter trust”:
“No significant reaction from the markets to such cosmetic will not be reduced. The reaction would be possible at lower rates of 0.5% or more.
Before the election of the President of the Central Bank will be cautious and will not significantly reduce the rate, justifying it allegedly inflationary risks. In fact, the purpose of manipulation with the rate, most likely, is a stable ruble. To leave a bet high — the only way to preserve the stability of the ruble before the election.”
Evgeny Volkov, head of Department of broker operations of RosEvroBank:
“The decision to reduce the rate of the Central Bank is pushing historically low inflation, which is at the level of less than 3%. The regulator exceeded the annual standard to combat rising prices and reducing the interest rate to stimulate economic growth. The rate reduction will lead to growth of crediting and availability of business financing. Although banks now have enough borrowers. The problem is to give the company credit, which guaranteed his return. Rates are at an acceptable level, but monetary policy easing will spur banks to lower interest rates on loans and deposits. Gradually we come to the values of Western Bank interest rates of 5-6% for loans.”
Bogdan Zvarich, chief analyst at IC “freedom Finance”:
“It is not excluded that at the December meeting, the Central Bank will continue the cycle of lower rates. The regulator”s decision will be decisive for the movement of the ruble. Rate reduction by 0.25% to support the ruble and will allow him to play high oil prices. In this case, we can expect a decline in the dollar to yearly lows — below 56 virtually any.
If the regulator lowered the rate by 0.5%, that could trigger the dollar”s rise from the current 58 days to 59 virtually any. To prevent such developments in the foreign exchange market can the price of oil. If Brent rises above $59, then the traders who had invested in the American currency, not strong enough for the game to improve. In this case, if the Central Bank has kept or raised, with the current cost of oil above $58 U. S. currency risked to retreat to the area of 50-55 virtually any.”