Bank of Russia today announced reduction of the key rate from 12.5% to 11.5% per annum. This is the fourth rate cut in five months, while inflation remained at 15.7% per annum.
Following the meeting of the Board of Directors on June 15 the Bank of Russia announced cut the key rate by 100 basis points to 11.5% per annum. The key rate – is the rate of Bank of Russia loans on securities (repo) for a period of seven days. “The Board of Directors of the Bank of Russia decided to cut the key interest rate, given the further weakening of inflationary risks, while maintaining a significant risk of cooling the economy. In the context of a significant reduction in consumer demand observed in February-May ruble strengthening slowdown in consumer prices continued, “- said in a statement the Bank of Russia, posted on its website.
Since February The Bank of Russia almost every month (except April), reduces its key interest rate. December 16, 2014, she was raised sharply – by 6.5 percentage points – from 10.5% to 17% per annum. The growth rate should slow down inflation and depreciation of the ruble. However, at the time the decision of the Central Bank caused a panic in the currency market and led to the collapse of the ruble. Simultaneously, the company faced a sharp rise in interest rates on loans and the rise in bond yields that led to the actual freezing domestic credit flows in a closed because of sanctions foreign markets.
CB has been repeatedly criticized for the December decision: some complained of his sudden (the decision was announced during the night), the other – on the lateness as too late, according to some experts, the decision to terminate the control of the ruble by means of foreign exchange interventions (the fall of the ruble began in the fall ). Despite the fact that inflation in February was still at 16% per annum, the exchange rate for the month is much appreciated, though not reached doobvalnyh values. Since a record increase of the key rate to date has decreased three times: from February 2 it was 15%, from March 16 – 14%, from 5 May – 12.5%.
The market was expecting further rate cuts by laying these expectations, particularly in the ruble bond quotes. However, if a month ago analysts were expecting that the next step is reducing the amount of 150-200 basis points, in the run-up to the meeting of the Board of Directors of the Central Bank on June 15 had put the figure at 50-100 basis points. The reason for the change was the dynamics of exchange rates and inflation in recent years. From mid-May the Central Bank announced the launch of replenishment of foreign exchange reserves and started buying in the currency market to $ 200 million a day buying up of 18 trading days, more than $ 3.2 billion. The news of this trend has led to the termination of the ruble: the dollar is stable for more than 50 rub. (At the opening of the Moscow stock exchange trading – 55.24 rubles and 62.05 rubles ./$ . / €).
«The recent depreciation of the ruble naturally raised doubts about the value of a rate cut. Currency began to depreciate, when the Central Bank announced that the daily purchase of $ 150-200 million for the replenishment of gold reserves “, – analysts Sberbank CIB. At the same time the annual inflation in May slowed slightly – from 15.8% to 15.7%. In an inflationary environment, still close to 16% (at the head of the Central Bank announced Elvira Nabiullina targets for 2017 and 4% less than the forecast of 7% in June 2016), and the falling ruble expect a significant reduction in rates will not have to.
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