Reducing the rate of the Central Bank: a hawk dove pretended? – RIA News

MOSCOW, June 10 – RIA Novosti The Bank of Russia on Friday for the first time in nearly a year lowered the key interest rate -. 0.5 percentage points to 10.5%. However, this step can not be called the beginning of the cycle of monetary easing policy, he warned the head of the Central Bank Elvira Nabiullina. She offered to market participants themselves to draw conclusions as to whether action control “dove” or “hawk”.

Analysts on the eve of the meeting regarding the decision of the Central Bank are divided, but the majority of expected easing control policy. They noted that the Central Bank were “free hand” to reduce the key rate, the more so that all the prerequisites for this were – low inflation, improvement in the economy and a positive external background.

“moderately tight monetary policy can and will persist even with a decrease in our rate moderately tight monetary policy -. Is the one that leads to a reduction of inflation”, – said Nabiullina at a press conference on the results of the Central Bank Board of Directors meeting . “Usually, central banks themselves do not characterize this market they are characterized by leave it to the discretion of the participants of the market.” – Said the head of the Central Bank at the request of the Russian Central Bank policy referred to “hawk” or “pigeon”

Ex. Finance Minister Alexei Kudrin called the best conservative approach to CB DCT mitigation. “That’s right, that dropped, and correctly, that the conservative” – ​​wrote Kudrin in his microblog on Twitter

Today’s decision of the Central Bank returned the key rate at the level of December 2014, when the Central Bank urgently raised to 17%.. Then in the midst of the financial crisis on the background of the collapse of the ruble regulator inflated overnight rate by 6.5 percentage points, off panic in the currency market. Despite the fact that then followed by a gradual reduction in the rate, it remained unchanged in August 2015, although in recent months, inflation has been significantly lower than the rate in annual terms.

The first cautious step

In several previous statements by the Central Bank gave a signal that will reduce the bid for one of the next board meetings. Now, the signal became more veiled. The regulator limited the phrase that will consider the possibility of further reduction in the key rate, assessing inflation risks and compliance with the inflation forecast.

At the same time, the Central Bank has improved its forecast for inflation dynamics, GDP and oil prices. Now the Bank of Russia expects the recovery from recession in the second half of this year. In the baseline scenario for oil average price forecast raised to $ 38 in 2016 and $ 40 per barrel in 2017-2018. Inflation, according to Central Bank estimates, should slow down to 5-6% in 2016, and the probability of risk scenarios with the price of oil at $ 25 a barrel is reduced.

“We have repeatedly stated that we see the potential to reduce the key rate to the extent that both will develop the conditions for the deceleration of inflation to the target level. And now, increased our confidence in the sustainability of lowering inflation and achieving the goal of 4% by the end of 2017. After increase uncertainty and risk in the beginning of this year the economic situation to normal dynamics of the economy and inflation develops better than expected inflation risks generally declined but there are still risks associated with internal factors -… inertia of inflation expectations and the uncertainty of fiscal policy ” -. Nabiullina explained

The head of the Central Bank warned that to achieve the target with inflation at 4% by the end of 2017 the key rate will be higher inflation by more than 2.5-3 percentage points. Therefore, a sharp decline in rates in the near future is not expected.

“Indeed, the trajectory of oil prices and the ruble remain key prospects for further rate cuts. While oil prices are approaching to the fundamentally justified level, external conditions are still important Breaking the Central Bank plans may be the Fed meeting on July 27 to be held two days before the meeting of the Central Bank Board of Directors Prior to this, in order to understand the possible actions of the Central Bank, it is necessary to focus on weekly inflation “.. – . According to analysts, “Sberbank CIB”

According to their assessment, the key rate at the end of the year may fall by 2 percentage points – to 8.5%. Analysts from Raiffeisen expect a rate reduction of 9.5% per annum towards the end of the year. But according to the deputy Anatoly Aksakov, already has all the objective conditions to reduce rates to single digits.

This is not a cycle

The current decline in the key CBR rate can not be called the first round of easing monetary policy, although the potential to reduce the rate it is, said Nabiullina. “Of course, the potential for a rate cut there, but the trajectory of rate cuts – when, in what amounts will be reduced rate – these decisions depend on the future economic situation, whether realized or appear new inflation risk is why we are supporting cautious. low-key approach “, – added the head of the Central Bank.

As long as the situation develops better CB expectations. “The Russian economy is really becoming more resilient to changes in the external environment in the first quarter, GDP declined less than we had expected, despite the drop in oil prices at the beginning of the year is important, that the normalization of the economic situation is not only due to improved oil market..”, – He noted . head of the Bank of Russia

She drew attention to the positive developments in the economy – import growth and non-oil exports, as well as increased production of a number of consumer goods. “However, the observed positive changes still are local in nature, are very heterogeneous across sectors and regions and is not large enough to determine the economic dynamics as a whole”, -. Nabiullina warned

According to her, the decline in prices for fruit and vegetables in March and April was due to the favorable situation – good views of the harvest, high inventory levels, low world prices. Spring vegetables and fruits have begun to fall in price earlier than usual, which contributed to lower inflation. But the “pitfalls” can become that in summer fruits and vegetables can not fall in price as much as usual after what happened in the spring of a significant reduction in prices. In June, inflation may temporarily exceed 7%, but will slow down again in the future, she said.

The key risk for lower inflation in addition to volatile oil prices Nabiullina called the uncertainty about the medium-term fiscal policy strategy, especially in the area of ​​social spending.

Analysts do not agree with Nabiullina in this matter. “In fact, there is no uncertainty associated with the fiscal policy, because the forecasts of the Ministry of Finance acts became clearer, and the central bank expects the indexation of salaries in the middle of this year will be in accordance with previously announced rates, ie it removes some uncertainty,” – says analyst Nordea Bank Dmitry Savchenko.