Of the important statements by the head of the Central Bank at a press conference, highlights were comments about a possible increase in the estimate of the neutral rate and that the regulator was also considering an increase in the rate.
“Two options were considered: keeping the rate and a possible rate increase. But the consensus decision was to keep the rate,” Nabiullina said during a news conference on Friday.
In addition, the head of the Central Bank pointed out that the regulator does not see a risk of a “domino effect” for Russian banks due to the situation of the financial sector in Europe and the United States. He also added that there is no direct impact on the Russian economy from the turmoil in Western financial markets, but the situation in the US banking sector increases risks for the global economy.
According to her, the regulator did not substantially discuss the step of increasing the rate, only the possibility of increasing it was mentioned. “Of course, traditionally we also consider the signal, but since we believe that the balance of risks has not changed, we consider it necessary to maintain the signal that was given last time, and in fact this means that the probability of a rate increase this year exceeds the probability of its decline,” explained Nabiullina.
Dmitry Kulikov, Director of ACRA’s Sovereign and Regional Ratings Group, notes that the decision was expected, so there should be no impact on the ruble and rate exchange rate, as the market did not receive any new information as a result. of the decision.
From the point of view of forecasting, in his opinion, it was important to confirm that expectations of a rise in the neutral interest rate are forming (that is, the one to which the key rate tends under normal conditions). “This, in turn, can affect long-term loan rates,” he said.
The average key rate range for this year is 7-9% per year, and the Central Bank expects to return to the neutral range in 2025. A neutral rate contributes neither to accelerating inflation nor to reducing it.
Mikhail Zeltser, stock market expert at BCS World of Investments, recalls that the country’s financial system has lived at a rate of 7.5% since last fall. During this time, many events occurred that nullified the probability of a further decline in the cost of financing, but also increased the threat of monetary tightening.
“Acute geopolitics, a sharp winter weakening of the ruble, a rise in the budget deficit amid falling exports and a rise in government costs, as well as an accelerated pumping of the money supply have exacerbated the risks of a rate hike”, the economist. saying.
According to Zeltser, deposit and loan rates now do not have lower price drivers, on the contrary, a slight increase in the cost of credit resources and an orderly increase in the profitability of bank deposits are not ruled out. “As long as pro-inflationary factors continue to dominate, the cost of resources cannot decrease,” explains the economist.
The ruble, in his opinion, should see an increase in strength against the background of signs of a tightening of monetary policy, but export and import flows and the budget deficit are now more important factors in the exchange rate of the National currency.
“So far we see only a decrease in the national currency in the area of the lows of April last year, there are no active purchases of the ruble yet, but this is a matter of perspective. We expect a gradual moderate recovery of the national currency against the background of a reduction in the growth rate of public spending, a narrowing of the Ural-Brent spread, further adaptation of business to Western attacks and a reorientation to the East” , believes the economist.
“In today’s realities, there is no question of a further reduction in the cost of financing: the revenue base has decreased, expenses have increased, the ruble has weakened by 25% over the past three months, expectations of Population and business inflation remain high, and the growth of the money supply remains high,” believes Valery Khoruzhy, a professor at the Department of Taxation and Tax Administration of the Financial University of the Government of the Russian Federation.
However, market participants are ready to increase if the balance of rate factors changes again due to pro-inflationary factors, and the Central Bank has stated this unambiguously. In addition, a slightly higher rate may be required if actual inflation deviates from the 2024 target of 4% per year.
As SberCIB Investment Research analysts expected, the Bank of Russia did not change its key rate. The regulator’s rhetoric has also stayed the same. The Central Bank believes that pro-inflationary risks prevail, and if they increase, it could raise the rate in the next meetings.
The Central Bank refers to such risks as restrictions on foreign trade, which can lead to a weakening of the ruble and an increase in the cost of imports. Budgetary policy factors and the labor market situation are also important. On the other hand, the Central Bank indicates that the high propensity to save of the Russians is holding back prices, although the inflation expectations of the population are now above the historical averages.
“In general, such comments are neutral for the OFZ market and the ruble,” said Igor Rapokhin, senior debt strategist at SberCIB Investment Research.
VTB said that against the background of holding the key rate, they do not expect significant changes in the deposit market – the average maximum rates for them will stop decreasing and will remain in the current range.
The absence of fluctuations in the market rates of deposits will be due to the desire of the banks to lengthen their deposits: this manifests itself in a decrease in the rates of short-term deposits and savings accounts, on the one hand, and a increase in the profitability of long-term deposits, on the other. VTB does not plan to change the terms of existing savings products, but will closely monitor the market.
“We also do not expect a significant change in rates in the retail lending segment. Currently, VTB does not plan to adjust the terms of its products either, but will closely monitor market conditions,” the lender explained.
Igor Alutin, Managing Director of the Financial Services project of the Moscow Stock Exchange, expects a neutral market reaction to the rate decision in the near future, since the cost of borrowing and the profitability of bank deposits, in general , follows the trajectory of the rate key.
According to the Finuslug analysis center, the average rates on consumer loans in the top 20 banks today are at the level of 19.3% per annum. And the rate of interest on deposits at the 50 largest banks is just over 7% per year. During the time since the previous meeting of the regulator, the rates have changed punctually and in different directions, while the maximum rates in the 20 main banks remain at a level of around 8% per year, mainly on deposits for a period of six months or more. further.
“Therefore, it is now more logical to keep part of the funds on medium-term deposits, and to move all savings to longer-term deposits, it makes sense to expect a sharp decrease in inflation expectations and an increase in the level of macroeconomic certainty”, advises the senior manager.
According to Nabiullina, a possible increase in the key rate by the Central Bank at the next meetings may encourage new depositors to delay opening an account, but still it is not worth keeping the money at home: it is better to take the funds to the bank and not lose the benefits.
“We have effectively given a signal that we can raise the rate if pro-inflationary risks grow… there is the possibility of a rate hike, but it is not predetermined. Therefore, if we are talking about people who decide to place money in deposits or not place, of course, they have to think about their financial goals first,” he said.
“You can expect a rate increase, which may not happen. But during this time, if you keep money at home, you will lose interest income that you could receive if you deposited money now. This, of course, must be taken into account.” and measure,” added Nabiullina.
