Bank of Russia has kept its benchmark rate unchanged at 10.5% – BBC

Contrary to the expectations of many analysts of the Bank of Russia Board of Directors did not reduce the rate at the meeting on 29 July. The main reason, which is encouraging, – it is to maintain inflation within the framework of earlier forecasts

After a brief spike in the first week of July, caused by the increase of tariffs for products and services of natural monopolies, the rise in prices, according to Rosstat, returned. to the normal rate of 0.1% per week. Inflation for July is expected at 7.2-7.3%, at the end of December – 5-6.5%. This will contribute to deflation likely in August. The fact that the prices in the last month of summer may decline slightly, saying, in particular, the Deputy Finance Minister Maxim Oreshkin

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However, the Central Bank is not a reason to reduce the rate. The regulator found that ceased to decline, core inflation, as well as seasonally adjusted monthly rates of increase in consumer prices and inflation expectations.

In his comments on the decision to keep the CBR rate notes that inflation will continue to slow down, especially under influence limitations on the demand side. The same policy of restricting demand and encouraging savings regulator is going to spend in the future.

Bank of worries the incipient growth of salaries, as well as the fact that fiscal consolidation (the freezing and reduction of costs), which carries out the Ministry of Finance, not enough stiff and the government will still be indexed payments to state employees and retirees.

«risk remains that inflation will not reach the target level of 4% in 2017. Along with the external risk is due mainly to the inertia of inflation expectations, uncertainty about the specific measures of fiscal consolidation, including wage indexation, and pensions – believe in CB. – The trend to an increase in wages and a reduction in deposit rates could lead to a weakening of incentives for households to save »

Accordingly, in order to reduce these risks, it is necessary” to maintain the Bank of Russia interest rates at a level challenging. savings, helping to reduce inflationary expectations and sustainable deceleration of inflation to the target level ».

Meanwhile, the reduction in consumer demand remains the main obstacle to the recovery of economic growth.

according to the Ministry of economic Development estimates that in the first half industrial production grew by 0.4%, agriculture – 2.6%, real wages went to zero. The deep red remains of retail trade and construction, which for six months fell by 5.7%. If trade and construction, fastened on salaries and credits (consumer and mortgage), would not have sunk so much that GDP could get a plus after the second quarter. Meanwhile, half a year the economy contracted by 0,9%

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But the Central bank, hold a bet on the two-digit level, it forces banks to keep high-end interest rates on loans. According to the regulator itself, the market average rate on consumer credits in mid-May amounted to 16,97-34,61% per annum, the average rate on mortgage loans as of June 1 amounted to 12,68%.

As for the economy as a whole, the Bank of Russia has noted positive trends in individual sectors. At the same time there is stagnation or slowdown in output growth in some industries, investments continue to decline. The positive region economy will emerge in the second half (qoq). Annual GDP growth will come in plus only next year, according to the Central Bank.

However, this does not make the Bank of Russia used some incentives for the revival of the situation in the economy.

«Real interest rates in the economy (taking into account inflation expectations) remain at a level that will ensure the demand for credit, does not lead to an increase in inflationary pressures, as well as preserve the incentives to save,” – noted in a press release Central Bank.

Thus, the Central Bank has once again confirmed that his priority is to achieve the inflation target of 4% by the end of 2017, including the expense of a slower economic recovery.

The next meeting of the Board of Directors of the Bank of Russia, which will consider the question of the level of the key rate, scheduled for September 16, 2016. It is possible that if the current inflationary dynamics of the regulator will reduce the rate to 10%, and by year’s end will bring it up to 9,5%.

At the same time likely save the settings of monetary policy and in the autumn. In the comments of the Central Bank on July 29, it states that “the decision and the continued existence of moderately tight monetary policy will contribute to achieving the inflation target».