The Bank of Russia has lowered its key interest rate to 15%. Market participants have accelerated the game for a fall of the ruble – CIA

The Bank of Russia has lowered its key interest rate to 15%. Market participants have accelerated the game for a fall of the ruble – CIA

January 31, 2015

  The first in this year meeting of the Board of Directors of the Bank of Russia decided to lower its key interest rate to 15% per annum. Thus, the regulator decided that achieved stabilization of inflation and devaluation expectations. However, the Bank acknowledged that the previously adopted measures to tighten monetary policy have a negative impact on the economy. Lively market reacted to the Bank of Russia: the dollar is rapidly overcame the level of 71 rubles ./$ and the euro approached the level of 80.5 rubles. / €.

 Contrary to the expectations of most financial market participants, the Board of Directors of the Central Bank today decided to cut its key interest rate by 2 percentage points, to 15%.

 Chairman of the Bank of Russia Elvira Elvira: “The December rate increase to 17% was an emergency measure that allowed 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 does not allow excessive cooling of the economy ».

 The reason for this decision of the Central Bank called “rebalancing risk of accelerated growth in consumer prices and a cooling economy».

 According to the Central Bank, adopted on 15 December last year, a decision on a sharp increase in the key rate has led to the stabilization of inflation and devaluation expectations to the extent that it expected the Bank of Russia. “There is a surge of inflation caused by the rapid adjustment of prices to an event and the weakening of the ruble is a time-limited character. In the future, inflationary pressures will be restrained by a decrease in economic activity, “- said in a press release of the Central Bank.

  The regulator was forced to resort to lower rates because it has a negative impact on the economy. According to the regulator, against a background of rising interest rates on loans and the banks’ claims to the quality of borrowers and ensure the observed slowdown in lending to the economy.

 The decision of the Central Bank to lower the rate caused a strong reaction in the currency market. Dollar exchange rate, traded near the mark of 70 rubles ./$ , after the decision of the regulator easily overcame this level, up to the level of 71 rubles ./$ . The euro exchange rate has exceeded the level of 80 rubles ./$ , rising to the level of 80.49 rubles. / €.

 Vitaly Gaydayev