Friday, January 30, 2015

Central Bank lowered its key interest rate to 15% – RBC

Central Bank lowered its key interest rate to 15% – RBC

The Board of Directors of the Bank of Russia has decided to reduce the key rate c 17 to 15% per annum. The report of the Central Bank explained that the decision was made due to “a change in the balance of risks accelerating the growth of consumer prices and the cooling of the economy».

«adopted December 15, 2014 Bank of Russia on a sharp increase in the key rate has led to a stabilization inflation and devaluation expectations to the extent that it expected the Bank of Russia. Observed a surge in inflation caused by rapid adjustment of prices to the weakening of the ruble and what has happened is a time-limited character. In the future, inflationary pressures will be restrained by a decrease in economic activity, “- noted in the report of the Central Bank.

At the same time, the Bank recognized that in the near future due to the depreciation of the ruble possible new acceleration of inflation.

The peak annual inflation, according to the Central Bank, reached in the second quarter of 2015, but after that it will start to decline.

«Slower growth in consumer prices will contribute to low aggregate demand while maintaining the total output of goods and services below potential, as well as a moderately strict policy of budgetary expenditures. Annual inflation is expected to decline to below 10% in January 2016 “, – emphasized in the report of the Central Bank.

The head of the Central Bank Nabiullina was quoted as saying in a press release regulator explained that the rate increase to 17% was an emergency measure, which helped to bring down the panic on the currency market and moderate devaluation and inflation expectations.

«key rate at 15% per annum is still quite high and contributes to the achievement of the inflation in the medium term, but not allows excessive cooling of the economy “, – said Elvira.

Chief expert at the Center for Economic Forecasting Gazprombank Yegor Susin believes that the decision of the Central Bank does not have a significant negative impact on inflation. “The impact of inflation can have only the dynamics of the ruble, but it is unlikely to be strong. Current rate cut should not greatly increase inflation, “- he said.

The news of the reduction of the key rate has caused today a new leap of the dollar and the euro. Within a few minutes the dollar on the Moscow Stock Exchange soared to 71 rubles., Which is more than 2 rubles. above the previous day’s close. At the same time, the euro rose to nearly 80.5 rubles., 2.8 rubles. higher than yesterday’s closing.

Head of Dealing Center Metallinvestbank Sergey Romanchuk said RBC that lowering the key rate increases the pressure on the ruble and was taken due to the strong political pressure on the Central Bank.

« High rates significantly limit the ability of lending and economic growth. Bank of Russia, as always, was between Scylla and Charybdis. Central Bank decided that contribute to economic growth is more important than fighting and inflation and affect the exchange rate towards its strengthening. Naturally, the dollar rose after the decision. The decision of the Central Bank can be interpreted in such a way that will allow the ruble to continue to weaken, “- he said.

Portfolio Manager on the bonds of” Raiffeisen Capital “Constantine said Artemov RBC that the debt market reacted to the decision of the Central Bank only yield corporate bonds , a decrease of 2.1 percentage points to levels of 15-17%.

«Perhaps this decision several revive the bond market in corporate bonds now there is some activity. OFZ already fortnight traded with the yield, implying a decrease of the key rate by 2 percentage points, so the government securities regulator’s decision to respond practically will not. On the contrary, their profitability would be increased if left unchanged rate “, – said Artemov.

According to Sucina, a significant positive impact on economic growth and lending decision to reduce the key rate, which he calls the technical, will not .

«Final rates for borrowers remain high. This is due not only to the cost of borrowing from the Central Bank and the rates in the money market, but also the assessment of credit risk in the current situation. Therefore, a significant push for the lending rate cut will not. But at least it will reduce the pressure on the banks and in the long term impact on the reduction of interest rates on the bonds that have a positive impact on the capital of the banking system “, – says Susin.

Chief Economist,” VTB Capital “by Russian Vladimir Kolychev offers wait two weeks, during which time it becomes clear that the Russians will do with their ruble savings.

«If the trend is the reverse inflow of ruble deposits in banks continues, and the pressure on the currency will go too, and the banks will opportunity to reduce rates on deposits as well as loans in the economy “, – says Kolychev.

But the chief economist Vladimir Tikhomirov BCS sure that no consequences for the economy of the key rate reduction will not result.

«rate of 15% compared to 17% of the difference no longer does. We will not see such a sharp decline in the cost of lending and growth in demand for loans, because the drop in demand not only due to the high rates, but also the economic slowdown. And this situation is unlikely to be developed in the near future. And given the acceleration of inflation the Central Bank will have to re-think about raising rates in the near term. Not in February, but in March and April of this inflation will reach or even exceed the level of rates will begin. And the Central Bank will have to think again about what to do next, “- says Tikhomirov.

The next meeting of the Board of Directors of the Bank of Russia, which will address the issue of the level of the key rate, scheduled for March 13, 2015.

It should be reminded that the Central Bank raised its key interest rate from 10.5% to 17% in mid-December 2014.

«This decision was driven by the need to limit significantly increased in recent devaluation and inflation risks” – then noted the report of the Central Bank.

In its decision the Bank of Russia has changed the value of money in the economy, forcing banks to raise deposit rates to 18-20% per annum and for loans – up to 30% per annum and above. The result of this was that some banks were forced to freeze lending – both corporate and retail.

Analysts warned that more than two months of business is so high rate of the Central Bank will not stand. If the situation with high stakes delayed more than two months, it will lead to a crisis, warned the vice president of “Business Russia” Nikolay Ostarkov. “If we’re talking about a company that already zakreditovana, it is actually the way to bankruptcy,” – he explained.

December 19, executive vice president of RSPP, Alexander Murychev sent a letter to the Central Bank Nabiullina with a request to reduce the key rate the next meeting of the board of directors to no more than 12%. The cost of financial resources at the level of 20-30% of severely limits the possibility of implementation of the program of import substitution and creates risks wave of bankruptcies of companies across all industries in the first half of 2015, wrote Murychev. Also, with the request to lower the key rate of the Central Bank addressed to the Association of Regional Banks.

January 21, 2015 “News” reported that at a meeting of the National Financial Council (NSF) under the Central Bank decided to lower the key rate by 2-3 percentage points The same day, the Central Bank denied the information.

«Bank of Russia denies reports that announced at a meeting of the National Council of the financial intention to reduce its key interest rate in the first quarter,” – RIA Novosti reported the press service of the regulator.

We also recall that during its annual press conference in December 2014, Russian President Vladimir Putin called the policy of the Central Bank of adequate and expressed the hope that with the improvement of the economic situation in the key rate of the Central Bank will be reduced.

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