the Bank of Russia decided to keep key interest rate at 6% per annum after the collapse of the ruble
Moscow-Live.ru / Akishin Vyacheslav Central Bank left its key interest rate at 6% at the same level, calling the ruble weakening as temporary
Moscow-Live.ru / Akishin Vyacheslav
the Bank of Russia decided to keep key interest rate at 6% per annum after the collapse of the ruble. As reported on the website of the regulator, in February and March because of the collapse in oil prices and coronavirus situation in the economy substantially deviated from the baseline forecast. In future, the Central Bank has promised to decide on a rate based on the actual and expected dynamics of inflation, economic development, and taking into account a risk assessment by both internal and external conditions and the reaction of financial markets.
“the Incident of the weakening of the ruble is a temporary proinflationary factor. Under his influence the annual inflation rate may exceed the target level in the current year. However, a significant moderating influence on inflation will provide the dynamics of domestic and external demand, due to the pronounced slowdown in the global economy and increased uncertainty,” – said in a press release. The Central Bank expects that the measures on maintenance of financialhowling stability will return inflation to 4% in 2021. The next meeting will be held at the rate of 24 April.
the Dynamics of Russia’s GDP will depend on the scale of the consequences of the pandemic in the early stages, their impact on production activity and demand, as well as business and consumer sentiment. The closure of the borders for people and goods and a sharp deterioration in the dynamics of world commodity and financial markets can cause moderate growth of the Russian economy will change the economic slowdown In the Central Bank expects that the package of measures which the regulator has developed together with the government will support the economy.
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“Contribution to support domestic demand this year will bring more social interventions announced in January this year and planned to implement national projects”, – said in a press release.
the Controller recalled that the proposed measures are aimed at maintaining access to Bank lending small and medium business, to support the development of mortgage lending, the protection of the interests of citizens affected by the pandemic. Additionally, there are steps that will reduce the administrative burden on the financial sector and support its capacity to provide resources to the economy.
the Rouble reacted to the Central Bank’s decision to leave rate unchanged small increase, but then again began to fall. At 13.40 the dollar was worth 78,58 ruble (-0,58 ruble), Euro 84.4 rouble (ruble -0,31). At 15.00 will take place the press conference of the Chairman of the Central Bank Elvira Nabiullina, which is expected the expanded review concerning the decision of the Central Bank.
the Chief economist of Alfa Bank Natalia Orlova said that the Central Bank’s decision was expected and corresponds to market expectations that must be the key to stabilizing moods. According to her, the Central Bank considers what to respond to short-term factor in raising rates unreasonably. Chief economist “PF Capital” Evgenie Nadorshin believes that the uncertainty in the world too large and the rate reduction will not solve all problems.
“If you treat a coronavirus as a temporary phenomenon, as the majority still considers it necessary to raise, and to lower the rate no. First and foremost, what needs to be addressed and the Russian Central Bank and banks worldwide, it is the support of business channels of monetary transmission, which not yet,” he said. Other experts note that the Central Bank may announce additional measures, similar to those that were adopted in 2014-2015: facilitating access to liquidity, measures to prevent the credit crisis among the population, including through the requirement not to raise mortgage rates.
To the collapse of the ruble on Wednesday, when the dollar for the first time in four years exceeded 80 rubles, most analysts expect that the Central Bank will leave the rate unchanged at 6% after six consecutive increases. The preservation of the rate expected 36 of the 37 analysts surveyed by Bloomberg, and 15 of 16 in the survey TASS. While the Central Bank on Thursday began alternative support the ruble in the form of sales of foreign currency from the Fund in relation to the price of Urals oil.
After the collapse occurred in the markets has become risky scenario TSB (oil at $25 per barrel in 2020 and $30-35 in the next two years, with a significant slowdown in the global economy). The dollar is above 80 roubles if oil at $26 per barrel was called the condition of interest rate hike analysts at Citi, Nordea and Gazprombank.
the Arguments for further rate cuts was also. Seriously considered this option, Alfa Bank pointed out that in this case, the Central Bank recognizes the limitations of monetary measures, but the economy will have a chance not to fall into recession due to budget inthe ‘my favorite hotels’. Rabobank analyst Peter Mathis told Bloomberg that Nabiullina will be to choose between the ruble and the recession in the economy and prefer to support the economy, reducing the rate to 5.5%.