Central Bank prepares rate to decrease: loans will drop, but revenues will not grow

The key rate will be lowered at a meeting of the Bank of Russia September 15: in this no doubt almost none, the only question is by how much. Arguments for the decline abound, chief among them — record low inflation, contrary to expectations slowed to 3.2% against target (target controller) to 4%. Until the market froze in anticipation of a decision of the regulator, Central Bank head Elvira Nabiullina made a batch of positive news from the banking sector, which can be perceived as another signal of decline. However, radical action by the regulator is not waiting: the Agency is conservative and drastic steps to change the bet can only spoil the picture of economic achievements.

photo: kremlin.ru

On the eve of the meeting of the Central Bank Nabiullina spoke in detail about what is happening in the banking sector, the forum of the Association of banks “Russia” in Sochi. The head of the regulator said that the net profit of the banks in the first 8 months of the year amounted to 1 trillion rubles, which is considerably higher than last year. She added that currently it is possible to speak about restoration of retail crediting and stabilization of quality of loan portfolio: loans to individuals in January—August increased by 7%. Continue to grow the deposits of the population: for 8 months of current year their volume increased to 25 trillion rubles. However, the head of the Central Bank warned that the regulator will continue to take stringent Supervisory policy for banks and in 2018 the credit institutions subjected to stress tests.

With regard to the key rate, here Nabiullina opened the card a long time ago, saying that the Central Bank is preparing to reduce by 0.5 or 0.25% from today’s 9%. Note, at the last meeting in July, the Central Bank retained its key interest rate, but for the current year reduced it three times.

The main reference of the regulator in easing policy rates is unusually low inflation, accompanied by a week-long deflation since August. At the turn of summer and autumn prices not only grow, but fall significantly: fruit and vegetables lost an average of 15.5%. However, the Central Bank clearly aware that this is a seasonal factor and the winter the situation will unfold in the opposite direction: cheap vegetables that are now farmers urgently sells at low prices, will end, and their stocks have nowhere to keep because of the shortage of storage facilities in Russia.

However, inflation as a fundamental factor influencing the policy of the financial regulator, for ordinary people, only the term from the news. In reality, the lower prices people are not there. As found by analysts of the Ranepa, the income of Russians continue to fall in spite of supposedly growing the economy: in July 2017 they decreased by almost 1% compared to last year.

That Russia’s falling inflation, but income is not increasing, is not surprising. Analyst “Discovery Broker” Timur Nigmatullin believes that too rapid a slowdown in inflation and inflation expectations is uneven across industries and dangerous for a developing economy like Russia. To prevent further deterioration of the situation, the Central Bank should not to miss with a reduction in rates, he said. “Now the economic growth is fading rapidly, and GDP growth slows. Thus, tight monetary policy could stifle recovery of economic growth due to the downturn in consumer demand. In this case the regulator without a sharp softening of rhetoric and a rate cut may not reach its inflation target of 4% and will suffer reputational losses,” — said the expert.

Caution in the actions of the Central Bank is predicted analyst GK Forex Club Irina Rogova: “If we take more decisive steps inflation, which is partly constrained by the stability of the ruble may accelerate”. In General, in its view, a rate cut to 0.25–0.5% will have positive implications for the real sector of the economy, and the loans will be slightly cheaper. “To win against such a move controller can and consumers who are planning a major purchase on credit. For example, mortgage rates had already been lowered. And the reduction of the key rate may encourage banks to further reduce them”, says Rogov.

However, experts agree that the rate cut will give impetus to the weakening of the ruble up to 60 per dollar, followed by the acceleration of inflation. And here is once again affected the real incomes of the population, who for the third year in a row does not overcome the fall.


Elvira Nabiullina, made a statement about the dangers of cryptocurrencies, so popular in the world lately. She reported that the Central Bank refuses to equate them to foreign currencies and the growth of the value of this cash instrument sees signs of a financial pyramid. The popularity of digital money Nabiullina called “kleptomania” and added that he believes investing in cryptocurrencies as high-risk and speculative.

Rising prices and a falling ruble. Chronicle of events

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