Further rate cuts, the Central Bank stopped the sanctions
The Central Bank of the Russian Federation on 27 April kept its key rate at 7.25% per annum. This decision was expected by the majority of market participants. In a press release, the Central Bank projected an acceleration of the approximation of inflation to the target level of 4% in connection with the weakening of the ruble in April 2018. The regulator hopes its preservation within these limits in the period up to 2019. From the statement of the Central Bank it is clear that monetary policy for the nearest time will be neutral and the probability of further rate cuts is decreasing. The Bank of Russia kept its key rate at 7.25% per annum
According to experts interviewed by “Prime” Agency, the Central Bank in the face of new sanctions imposed on Russia in early April, and fluctuations of the ruble caused by this, took a wait. Indeed, most likely, we can expect completion of the process of rate reduction, which lasts from January 2015.
Major movements from the Central Bank the market does not expect
According to the chief investment strategist of financial group “BCS” Maxim Shein, from the Central Bank was previously some indication that there might be a further planned decrease in the interest rate, if inflation is low. However, in General, after a new wave of sanctions after what happened in the currency market, no one really expects from the Central Bank serious movement in this direction.
“At least until the inauguration was held, did not happen reshuffle in the government,” – said Shein.
According to him, market is likely just does not look far away. But, judging by the yields, particularly on further rate cuts are not being laid.
“Previously the yield curve for the Russia has been inverted. Now in this explicit form are not in this situation. Apparently, everyone understands that inflation is actually higher than officially, says the SSC”, – said Shein.
Shein said that the Central Bank has shown its interest rate decision that he took moderately a wait.
The issue of normalization becomes obvious
According to Professor of Finance at the new economic school (NES), Oleg Shibanov, with this decision of the Central Bank “the story was quite curious.” In early April, surveyed by Bloomberg fortunetellers believed that the reduction of the key rate will continue, since the Central Bank would like this year to complete the normalization. But the events of the last two weeks – new sanctions in early April and the depreciation of the current 57 to 62 rubles to the dollar – had a direct impact on everyone. Analysts changed her opinion, suggesting that the rate should not be changed. And the Central Bank, in the end, it too has not changed.
“When we have a jumping course, this automatically has an impact on import prices, the goods we import. And is able to affect inflation. Because of the Central Bank target of 4% by year-end, not above, he decided to wait and conservatively to see what will happen,” said Shibanov.
The expert noted that the sanctions had a negative impact on RUSAL and other Russian companies, literally collapses the value of shares can have an impact on the economy as a whole. Therefore, to reduce now rate difficult, as it is not clear how to behave in the future, inflation and the exchange rate.
Shibanov believes that, judging by the comments of the Central Bank, the issue of normalization becomes evident.
“From the point of view of the Central Bank, its current communiqué, perhaps the spacing is correct, more or less equilibrium rate for the Russian economy has shifted closer to 7%, It means that one or two times the rate may be reduced by 25 basis points, after which conditionally will complete the process of decline, which lasts from January 2015, when the rate was 17%,” said Shibanov.
According to him, the Central Bank’s thinking on further actions. And they can different direction.
“In principle, then the rate may rise and fall after reaching a 6.75-7%. Sanctions and the exchange rate has played a key role. Before that, it was expected that the rate will continue to decline,” – said the expert.
Meanwhile, the ruble is practically not reacted to the decision of the Central Bank to keep the key interest rate unchanged, as evidenced by the auction.