Photo: Ekaterina Kuzmina/RBC
The Bank of Russia pointed to the reduction potential of the reduction of the key rate in the first half of the year to reflect changes in external and internal conditions. The regulator also acknowledged the “short-term risks” in connection with the beginning of purchases by the Ministry of Finance currency
The Bank of Russia first in this year meeting of the Board of Directors has retained, as expected, the key rate at 10% per annum, is spoken in the message of Bank of Russia. “The dynamics of inflation broadly in line with the forecast, inflation expectations are gradually declining, and the economy is recovering faster than previously expected”, – stated in a press release following the meeting.
Central Bank stressed that the plan to hold the Ministry of Finance of transactions for the purchase of foreign currency “will not create significant inflation risks, while maintaining the Bank of Russia moderately tight monetary policy”. “Taking into account changes in external and internal conditions, the potential of reducing the key rate by the Bank of Russia in the first half of 2017 has decreased”, – concluded CBA.
The controller maintains the rate at 10% since September 19, 2016, when it was reduced by 50 b.p. with 10.5%. While at the previous meeting on 16 December, the Central Bank has adjusted the wording of the signal about the future, pointing to the possibility of lowering the key rate in the first half of 2017.
However, the Central Bank on Friday, February 3, for the first time acknowledged the short-term risks to inflation in the beginning of the purchase at the request of the Ministry of Finance from February 7 currency market the volume of additional oil and gas revenues in excess of actual oil prices budgeted at $40 per barrel. “Maintaining a moderately tight monetary conditions will help limit inflationary risks, including short-term risks in connection with the beginning of purchases by the Ministry of Finance of the foreign currency on the foreign exchange market”, – assured the Bank of Russia.
In the release notes that the transitional rules budget with the Finance Ministry purchases/sales of foreign currency will contribute, in particular, to reduce monetary conditions and inflation dynamics from fluctuations in oil prices. “In the medium term, the use of budget rules will contribute to macroeconomic stability and a more predictable and stable dynamics of interest rates in the economy”, – stressed in the Central Bank.
To do this, the regulator pointed to the fact that the Bank of Russia “maintained a floating exchange rate regime, meaning the rejection of foreign exchange intervention to influence the nominal exchange rate of the ruble.” He also noted that the conduct of the Ministry of Finance of the foreign exchange market does not preclude the achievement of the inflation target of 4% by the end of 2017, and the impact of these operations on the formation of liquidity in the banking sector he called “near neutral”.
On Friday, the regulator noted that “the risk that inflation in 2017 will not reach the target level of 4%, retained when reducing the risk of inflation in the medium term”.
Market participants interviewed by RBC expected that the Central Bank may delay next rate cut until the second quarter. They connected it with the expected weakening of the ruble in connection with the commencement of currency interventions. This, in turn, their concerns can slow the decline of inflation to the target value.
According to the latest data of Rosstat, inflation for the week from 24 to 30 January 2017 amounted to 0.1%. Thus, annual inflation on January 30, decreased to 5.1%. Inflation in 2016 was minimal for all history and amounted to 5.4%.