the Bank of Russia at the last meeting of the Board of Directors in late April lowered its key rate by 0.5 percentage points (despite the fact that standard pitch change rate – 0.25 percentage points) to the current 5.5% per annum. This is the minimum level for all time of existence of the index, any new reduction will bring the rate to historical lows.
In early June, the head of the Bank of Russia Elvira Nabiullina declared that in June, the Central Bank, among other options, will consider a reduction in the rate from one percentage point. However, she hinted that even more simultaneous rate cut still not. A few days Nabiullina said about the “decisive step” of a rate cut in June, which gives reason to think about lowering rates until at least 5%.
the Bank of Russia untie the hands of low inflation. In may, the growth rate of consumer prices slowed down to 3%. With such initial conditions the return of inflation to the target of 4% will take time, so now the regulator remains a vast space to reduce the key rate, says economist “BCS Premier” Anton Pokatovich.
a Major factor in the disinflationary pressure is compressed consumer demand, which will have to recover in the summer, then very cautiously. Also in favor of moderation of price growth now stands strengthened (compared to March-April) to levels close to 70 rubles per dollar, the ruble, says Pokatovich. According to his forecast, on Friday the rate will be reduced by 0.75 or 1 percentage point.
With this prediction agrees the chief analyst of Sovcombank Mikhail Vasiliev. Overcoming the negative impact of coronavirus is now the Central task of the government and the Central Bank, he said. “The reduction of the key rate will make money cheaper in the economy that will stimulate investment and consumer demand. At full power, the easing of monetary policy will work after the lifting of the quarantine restrictions,” – said Vasilyev.
He stressed that the reduction of the key rate will lead to a reduction in the cost of basic banking products – deposits, consumer loans, mortgage. “This will greatly help the economy because it will make more affordable loans to companies and citizens. Citizens and business will have the opportunity to refinance loans at lower interest rate to reduce their debt burden and free up resources for consumption and investment. Affordable mortgages will boost construction and help speed up recovery from the economic recession,” – said Vasilyev.
According to Pokatovich, lending rates will decline by 0.4-0.6 percentage points in the next two to three months. Mortgage rates also continue to decline to levels below 8% and can end the year in the range of 7.3 to 7.7%. MSednie rates on deposits, according to his forecast, in the summer drops to 4.7-4.8 percent from the current 5%.
in Addition to lowering the key interest rate on Friday, no less important is the controller signal about future actions. The Bank of Russia will maintain the signal on the possibility of further monetary easing, and no doubt Vasilev. In the absence of external shocks by year end key rate may drop to 4%, he said. To slow down or even stop monetary policy easing may a new wave of coronavirus and the threat of a more severe downturn of the global economy, a new round of capital outflows from emerging markets, a sharp drop in oil prices, aggravation of trade war with China and the devaluation of the yuan and the introduction of new us sanctions against ruble-denominated debt or significant Russian companies, says the analyst.
At the same time, according to Pokatovich, in itself, the rate reduction will have limited impact on the growth of the Russian economy, and to avoid an expected Bank of Russia in 2020 the GDP to 5% is unlikely. Now the prospects of recovery depend directly on the efficiency of the undertaken by the authorities to take measures to support business and population, he says.
