A decrease in the key rate of the Central Bank of the Russian Federation by 1 percentage point, to 7.5%, would have a positive impact on the economy and investment processes, said the head of VTB, Andrey Kostin.
“We expect that there will be a further reduction (of the key rate – ed.), Since the Central Bank and the government have made great progress in fighting inflation. Inflation forecasts are different – from 2.8% to 3.2% by the end of this year, which gives great opportunities and room for the Central Bank to lower the rate – this, of course, will further increase the demand for loans. In the interests of the economy and the development of investment processes today, of course, it is good if the rate is reduced by at least one percent, “Kostin said in an interview with the TV channel “Russia 24”.
“We are quite optimistic about this (reduction of the key rate – ed.), Although, to be honest, banks, to be honest, a very sharp decline in the cost of borrowing is also not very good, because it will put a lot of pressure on our margin,” said the head of VTB.
“We believe the correlation is as follows – a rate cut by one percent can lead to a decrease in deposit rates by 0.6-0.7%. If today we believe that the average deposit rate for banks, with the exception of Sberbank SBER, is 7.5%, then say, a two percent cut would lead to the establishment of a deposit rate of 6%, “Kostin explained, answering a journalist’s question, how the key rate cut will affect the deposit rates of banks.
In mid-September, the Bank of Russia Board of Directors decided to cut the key rate by 50 basis points to 8.5% per annum. The Central Bank of the Russian Federation admits the possibility of a key rate cut in the next two quarters. When deciding on the key rate, the Central Bank will proceed from an assessment of the risks of a significant and sustained deviation of inflation from the target, as well as the dynamics of consumer prices and economic activity relative to the forecast.