this was discussed at the last weekly online conference head of the Bank of Russia Elvira Nabiullina. Now the conference will be held once in two weeks.
Main news – the Bank of Russia does not exclude the reduction of the key rate by one percentage point at the next meeting of the Board of Directors on June 19. “At the last Board meeting we considered the possibility of a rate cut by 100 basis points. I admit that if the situation will develop, as it is now, the option of reduction of 100 basis points will also be considered, undoubtedly, among the other alternatives”, – said Nabiullina. The last meeting of the Board of Directors of the Bank passed on 24 April, it was decided to reduce the key rate by 0.5 percentage points to the current 5.5%.
While in June the most probable is the scenario with a reduction rate by 0.75 percentage points to 4.75%, the chief economist at Sovcombank Kirill Sokolov. Inflationary pressure in Russia is gradually returning to normal after a surge in previous weeks (late April – early may, according to Rosstat, weekly inflation has slowed). The scale of the economic drawdown in the second quarter will be comparable with the crisis of 2008-2009, highlights the falcons. Thus, the Bank of Russia expects the economic slowdown in this quarter could reach 8%. In developing countries the Central banks are also accelerating their pace of decline in key interest rates to support the economy, reminiscent of the falcons. Against the background of a pandemic, the focus of monetary authorities in developing countries are increasingly shifting from risk of inflation in favor of stimulating the economy, he said.
the Central Bank has made another announcement, remaining in the shadow of statements about the key rate. Nabiullina said the temporary introduction of long-term repo operation (when the Central Bank buys the Bank’s securities for rubles, and then sells them at a predetermined date) one month and one year. “For long-term operations, taking into account the objectively higher risks, we plan to take only the most reliable assets – OFZ bonds and bonds of constituent entities of the Russian Federation and municipal entities with the highest credit rating on the national scale”, – said the head of the Central Bank. The first month repo auction, the Central Bank plans to hold in late may, while the annual in late June.
This scheme should allow banks to buy large amounts of state and regional bonds and to borrow money from the Central Bank under their mortgage. Thus, banks will receive the necessary amounts of liquidity, and the Finance Ministry can afford to safely increase the national debt and to Finance the budget deficit, minimizing the use of funds from the Fund for this purpose.
