the Bank of Russia may cut its key interest rate to 4%. Final decision will be made on July 24. The consequences of such decisions can be very complex and even unpredictable for ordinary Russians, small and medium business and for the economy as a whole: rate of return on deposits will fall down and the citizens rush to withdraw their funds from banks, which could lead to a wave of bankruptcies among credit institutions. As for the ruble, the national can depreciate even more — up to 75 rubles per dollar.
experts expect the decline in Bank of Russia key rate to 4% at a meeting of the Board of Directors on 24 July. In June, the regulator cut the key rate by 100 basis points to 4.5% per annum.
the ruble key rate low is also a factor of pressure, the domestic currency generally decreases with decreasing rate.
“the impact of the reduction in the key rate of the CBR will lower rates on loans to banks to record lows, making them more accessible to the public. In addition, reduced rates on deposits”, — said the head of analytical Department AMarkets Artem Deev.
We are witnessing the failure of consumer demand and foreign exports, says a private investor and the founder of the “IPO CLUB” Peter Gulin “In such circumstances it is necessary to improve liquidity and further injections from the budget, otherwise we may see a further decline in the number of credit institutions in our country,” he said.
Previously, “Rosgosstrakh Bank” and NAFI has published a study showing that about 30% of Russians take their money out of banks with a further fall in rates on deposits. It seems that in the coming months the banking sector will face the need to increase reserves for maintenance-free loans.
“the Main risk for the ruble remain of U.S. sanctions and lower oil consumption. I see finding a dollar in the hallway 72-75 rubles to the new year, in the absence of a second outbreak of coronavirus and the introduction of lockdown,” says Gulin.
According to the head of Department of analytical researches “Higher school of financial management” Michael Kogan, the consensus market forecast assumes a “modest” lowering the key rate to 4.25% per annum, instead of 50 basis points, as previously predicted by German Gref.
“Such an outcome could cause a neutral market reaction as it will preserve the space for further policy easing in the fall and winter, which can not be excluded in the case of deviations of actual inflation down from its expected trajectory, he says. — For the past two months the weekly growth rate of consumer prices remained at the level of 0-0,1%, however in the conditions of open economy and the effect of pent-up demand after the last in ��Arte weakening of the ruble, the Central Bank has not ruled out increasing inflation in the summer months due to the low base last year.”
however, the financiers do not exclude that the Bank of Russia may decide to reduce the key rate at once on 50 points, which could unsettle the market, which may decide that the regulator sees the economy is worse than it appears to its participants.
“the rate Reduction of 0.5% will also significantly reduce the rate further easing of policy and could trigger a wave of profit-taking by foreign investors, who managed so well to capitalize on the rally since mid-March, says Kogan. — Currently, there are preconditions for deterioration in moods on the global markets, which are heavier advantage competitor trump Joe Biden during the presidential campaign that may result in the extension of sanctions against Russia in case of his arrival in the White house in November. And this factor is taken into consideration the currency market”.
