the Board of Directors of the Bank of Russia at its meeting left unchanged at 10% per annum — the key rate and the tightened position for future decline: the probability that in March 2017 it will remain at the same level increased. The main theme of the review Board was the purchase of the Ministry of Finance of the foreign currency on the open market in February. Reasons about why they will not affect the inflation backdrop, the Central Bank so much that the version of nesnesini rates because of this solution — the main.
on the Eve of the meeting of the Board of Directors of the Central Bank’s key rate in the market there was almost full consensus, the key rate will be reduced. So when he was justified, the decision had almost no effect on the foreign exchange market (see text on p. 2). Review the Bank of Russia to the decision meanwhile, the market was rather negative. The Central Bank has made it clear that, despite the absence of any reasons to consider the future of a small tightening of monetary policy is justified, March 24, at the next meeting of the Council, this policy can be continued and the key rate will be reduced. “Taking into account changes in external and internal conditions, the potential of reducing the key rate by the Bank of Russia in the first half of 2017 has decreased,” stated the regulator.
Which, in fact, internal conditions refers to the Board of Directors of the Central Bank, the regulator cannot be computed — in a statement, the Central Bank is extremely lists in detail all possible risks that could be taken into account when considering the nepovyshenie rates, and States that they are at least not increased. Recall that in the present situation, with gradual reduction of inflation to maintain the key rate at the current level means an automatic tightening of monetary policy: the real cost of refinancing instruments grows at the same rate, which reduced the annual index of consumer prices, which amounted to 5.1 percent on January 30 (5.4% — the end of 2016). According to the Bank of Russia, even real wage growth in annual terms in 2017 will not create an independent proinflationary pressure.
Formally, the logic of the decision of the Central Bank — in the observed decline in the CPI is temporarily active components, namely the strengthening of the ruble in the second half of 2016 and a good harvest, without their actions the risks of inflation from the graph, ensuring the achievement of target 4% CPI increase to the end of 2017 can be realized. Reversing this logic, the Central Bank could directly claim that at current trends it will cut rates if inflation will behave better than he expected, and will decrease faster than he expects. The Bank of Russia while recognising that the restoration of growth in GDP and industrial production, despite the fragmentation of growth in the last above his expectations. But that is less important than the main discussed topic comment— the impact on the decision of the Central Bank programme of the Ministry of Finance for the purchase of foreign currency on the domestic market. Yesterday the Ministry of Fin ance unveiled plans for the sale in February of 113 billion rubles of windfall profits from oil exports and the Central Bank will consider in its operations on provision and absorption of liquidity in the banking sector, this will guarantee an influx of rubles.
“the Planned holding by the Ministry of Finance of transactions for the purchase/sale of foreign currency on the foreign exchange market under application of the transition budget rules will not create significant inflation risks, while maintaining the Bank of Russia moderately tight monetary policy”— notes of the Central Bank. This statement does not look too sincere, given that in the same document the Board of Directors of the Central Bank acknowledges “short-term risks,” transactions of the Ministry of Finance (to be implemented by the Central Bank). By themselves, the purchase of foreign currency by the Ministry of Finance, note, inflationary pressures do not create is a non-equity transaction, rubles, thus entering the market that would fall on him in any case, budget the channel — for example, in the form of deposits of the Ministry of Finance in the banking system. Complexity creates only the destruction of habitual sched ule nefterubli markets during the year. Procurement by the Ministry of Finance currency occur at the beginning of the year, whereas in previous years the expenditure of the Reserve Fund because of the seasonality of the budget execution comes at the end of the third or fourth quarter of this year. Given the time lags, inflation is unlikely to react on occurring earlier than the summer of 2017.
However, even “psychological” pressure of the operations of the Ministry of Finance on the course promises to be significant. The risks of the Central Bank mentions the uncertainty in foreign political and foreign economic situation, which affects openly mentioned not only inflation, but also exchange rate expectations — but not in connection with the Ministry of Finance. Nevertheless, it is clear that the Central Bank decision caused including concerns of how the case will develop the situation on the market in connection with the “intervention” of the Finance Department and the planned weakening of the ruble.
In any case, extremely careful and vague comments of the Bank thereon, including those associated with the decision from February 3, suggest that the head of the Central Bank Elvira Nabiullina and her team feel about the idea of “smoothing” of course, no less wary than the ideas 2015-2016 on “replenishment of reserves of the Central Bank” to the level of $ 500 billion In any case it is unlikely that the Central Bank was the author of the scheme, which, in fact, is another way of realization of the program “replenishment reserves”.
the Central Bank Decision on key rate means among other things, and the failure of the Bank of Russia from demonstrative stimulate investors ‘ expectations. The question of to what extent the increase in oil prices and the growing enthusiasm of the market increase profits played a role in the release of the GDP growth in the fourth quarter of 2016, remains open, and while there is no indication that in 2017, the Central Bank will succumb to pressure to “rhetoric of growth.” However, it is not observed and the government’s willingness to organize this kind of campaign. Likely because now predict further development of the external environment factors of the new US President Donald trump is a thankless task.
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