January 30th. FINMARKET.RU – Board of Directors of the Bank of Russia decided to cut the key interest rate c 17,00% to 15,00% per annum. According to the report the regulator, the decision was made on the basis of changes in the balance of risks accelerating the growth of consumer prices and the cooling economy. “Accepted December 15, 2014 Bank of Russia on a sharp increase in the key rate has led to a stabilization of inflation and devaluation expectations to the extent to which expected the Bank of Russia. The observed burst of inflation caused by the rapid adjustment of prices to the weakening of the ruble and what has happened is a time-limited character. In further inflationary pressures will be restrained by a decrease in economic activity. According to the forecast of the Bank of Russia, the growth rate of consumer prices fell to below 10% in January 2016, “- said in a CBR . An nual inflation to peak in the 2nd quarter At the end of 2014, inflation was 11.4%, core inflation – 11.2%. At the same time, in December 2014 the rate of growth of consumer prices for the month was 2.6% on a significant weakening of the ruble, inflation expectations and increased consumer demand for non-food products. As of January 26, the annual growth rate of consumer price inflation was 13.1%. According to the Bank of Russia, in January 2015 the growth rate of consumer prices for the month fell slightly, however, the annual inflation will continue to grow and reach its peak in the 2nd quarter of 2015. In the medium term inflation will decline The prevailing monetary conditions create preconditions to reduce inflation in the medium term. The annual growth rate of money supply (M2) declined significantly. Interest rates on deposits of the population increased significantly, which will create conditions to increase the propensity to save and stimulate the flow of funds to bank deposits. Against the background of rising interest rates on loans and the banks’ claims to the quality of borrowers and to ensure there was slowdown in credit growth of economy (adjusted for currency revaluation). In the 1st half of the GDP will fall by 3,2% Some increase in economic activity in December 2014 was due to the influence of temporary factors, including the growth in demand for durable goods, with increased inflation expectations, and was accompanied by faster transfer of exchange rate changes on prices. According to the Bank of Russia, the annual growth rate of real GDP in 2014 was 0.6%. In the future, is expected to significantly decline in output in the background of deteriorating external conditions due to lower oil prices and the closure of the external financial markets for Russian borrowers. Given the high prices of imported investment goods, the deteriorating financial performance of companies, the limited availabili ty of long-term preservation of financial resources and the tightening of credit conditions continue to decline in investment in fixed assets. Decline in real wages and a slowdown in retail lending will cause a decrease in consumer activity. The negative effect of deteriorating external conditions only partly be offset by exchange rate dynamics. According to the Bank of Russia, in the first half of 2015 Russia’s GDP will fall by 3.2% in annual terms. slowdown in prices will help to lower aggregate demand What happened weakening of the ruble will continue to have an impact on the prices of goods and services. In this regard, may increase the annual inflation in the coming months. However, as the economy gradually adjust to the changing external environment and the exhaustion of the impact of exchange rate dynamics in the prices projected to decline in inflation and inflation expectations. Slower growth in consumer prices will contribute to low aggregate demand while maintaining the total output of goods and services below potential, as well as a moderately strict policy of budgetary expenditures. Annual inflation is expected to decline to below 10% in January 2016. 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 March 13, 2015.
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