18.01.2021

When to expect rate cuts of the Central Bank

Economists do not expect rate cuts of the Central Bank until the second half. In any case, push the regulator to decline maybe slowing the rate of inflation. If during two consecutive months inflation will remain below its 5% year-on-year, this can be a “powerful signal for the future reduction of the key rate,” says George Vashchenko.

When to expect a rate cut?

The regulator is considering to increase the rate, but later, Antonov says. The main obstacle in the way of reduction of the key rate is still inflation, says Vashchenko of “freedom Finance”. This indicator is most important for the Central Bank.

In April, inflation is at a comfortable level. After a long period of growth last week, the inflation in annual expression began to decline and amounted, according to estimates by Raiffeisenbank, a 5.2% year-on-year (in March amounted to 5.3%). The peak of inflation, which is the beginning of the year due to the increase in VAT was prepared, the regulator, most likely, passed, the analysts wrote in their review in advance of the meeting of the Central Bank.

However, not all proinflationary risks have been exhausted. Inflation expectations that the Bank of Russia also factor remain high and nezakonnye, noted Renaissance Capital. “The expectations of the population significantly increased due to the increase in VAT and remain sensitive to current price movements and changes in the exchange rate,” writes in the review analyst Andrew Melaschenko. “Despite the fact that the peak of inflation, most likely, passed, not all companies have adjusted their prices in accordance with the VAT increase, the latter may require additional time”, – consider in the company.

What are the consequences?

Keeping the key rates was expected, so the market reaction to this decision will be calm, analysts say. According to the head of operations on the Russian stock market IR “freedom Finance” George Vashchenko, the stock market will not worry, and USD/RUB to trade in a range 64-65 rubles.

Nothing out of the ordinary because of this decision, the Central Bank will not occur neither in the money market or in currency and interest-rate swaps, said General Director of “MC Sputnik – capital Management” Alexander Losev. Rather, the effect on market rates upward can exert outflow from the Russian market of foreign investors, if the weakening of the ruble will continue, and a reduction of liquidity in the banking system due to the increased borrowing of the Ministry of Finance on the OFZ market, suggests Losev.

To expect any significant changes in lending rates while also not necessary, economists believe. According to Losev, banks are more likely to focus on other factors when determining rates, namely the credit quality of borrowers and the current level of its margin. As for the future, and the expected rate cut, it will lead to lower interest rates on ruble deposits and loans by about 0.2-0.5 percentage points, says the analyst of “ALOR Broker” Alexey Antonov.

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