To consolidate the trend towards a sustainable reduction of inflation, according to Bank of Russia estimates, it is necessary to maintain the current level of the key rate until the end of 2016, with the possibility of its reduction in the first or second quarter of 2017. Taking into account the adopted decisions and maintain a moderately tight monetary policy, the annual growth rate of consumer prices will be less than 4.5% in October 2017 and will fall to the target level of 4 percent in late 2017. When deciding on the key rate in the coming months, the Bank of Russia will assess inflation risks and compliance with the dynamics of the economy and inflation baseline forecast.
Taking a decision on the key rate, the Board of Directors of the Bank of Russia proceeded from the following.
First. Annual inflation continued to decline in the baseline forecast of the Bank of Russia, however, this is largely due to the influence of temporary factors. The assessment on October 24, the annual growth rate of consumer prices decreased to 6.2% after 6.4% in September. A significant contribution to the reduction of inflation makes the dynamics of the ruble in the conditions of higher-than-expected oil prices and increased interest of foreign investors in Russian financial assets. In addition, a good harvest contributed to the slowdown in the growth of prices of food items. The disinflationary impact of domestic demand is gradually reduced, resulting in a slow decrease in growth rate of prices of non-food items. Households still prefer to stick to savings behavior. However, trend growth in real wages can contribute to the gradual recovery of demand for goods and services. Maintaining the key rate at 10 percent per annum for a sufficiently long time will conti nue to shape the monetary conditions required to maintain incentives for savings and consolidation of trends towards a sustainable slowdown of inflation is influenced by limitations on the demand side. This will create conditions for the further decrease in inflationary expectations.
the Second. September signal the Bank of Russia about the future trajectory of key rates was focused on the adjustment of market expectations, which predicted a more rapid decline in the key interest rate at a slower further decrease of inflation, the Bank of Russia. The ad signal has contributed to the upward shift of the yield curve in the financial market. However, the inflation expectations of market participants at the end of 2017 still exceed the inflation target of the Bank of Russia at 4 percent. Correction in interest rates in the financial market contributed to maintaining a moderately tight monetary conditions that will persist in the economy long enough. Positive real interest rates would be maintained at a level that ensures that the demand for credit not leading to inflationary pressure and will maintain incentives for savings. Incipient signs of recovery of consumer credit not yet carry significant inflationary risks, given that significant part of loans is estimated to have been used for refinancing previously obtained loans.
Third. a Revival of manufacturing activity remains fragile. Retained its heterogeneity across industries and regions. According to the Bank of Russia, a moderately tight monetary conditions do not inhibit the recovery of economic activity, and the main restrictions lie in the structural region. The labour market adjusts to new economic conditions, the unemployment rate has remained at a stable low level. Continues the development of processes of import substitution and expansion of non-oil exports for some items, there is an additional point of growth in the industry, including in high-tech industries. At the same time, they cannot provide confident positive dynamics of production in General. At the same time there is stagnation or a slowdown in the growth of output in selected industries and the emerging signs of recovery in investment activity remains weak. For the development and consolidation of positive trends need time. In General, for 2016, the production o f goods and services will drop by 0.5-0.7%, in the fourth quarter it is expected a small positive quarterly GDP growth. In 2017, economic growth will be low — less than 1 percent. This forecast assumes conservative assumptions of a low rate of growth in the world economy, the average annual oil price of around USD 40 per barrel, a moderate outflow of capital and the preservation of the structural constraints of the Russian economy development.
Fourth. Risks remain that inflation will not reach the target level of 4% in 2017. This is due primarily to inertia in inflation expectations, the possible weakening of incentives for household savings and the rise in real wages which is not accompanied by productivity growth. Not yet adopted legislative solutions in respect of specific measures of fiscal consolidation, including indexation of wages and social benefits in the medium term. Negative impact on exchange rate and inflation expectations may also have volatility in world commodity and financial markets.
most of the comments to the decision of the Central Bank are reduced to one point, the key rate has remained high, and the rhetoric of the Central Bank – hard. The Central Bank can’t seem to train the market to think about the possibility of low inflation. Therefore, the higher the probability of retaining the Central Bank rate at 10 percent in 2017.
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 December 16, 2016.
Recall that in 2016, the Central Bank reduced the key interest rate twice. June 10, the controller brought it down from 11 to 10.5 percent per annum, level changing rates for the first time from August 2015. The second reduction of the key rate, to 10% occurred at the meeting on 16 September.
No comments:
Post a Comment