The Russian banking system is moving away from the record low cost of loans: increase in the key rate by 0.5 p.p. at once. up to 5% has already been included in loan rates, and in the future they will only grow… Izvestia was informed about this by the largest financial organizations. The decision of the Central Bank is due to the accelerated rise in prices and forecasts of economic recovery to the pre-pandemic level in the second half of the year. The market believes that in June the Bank of Russia will take a break, but by the end of the year the rate will be increased to 5.5%.
Speeded up spending
The growth rates of consumer prices and inflationary expectations of the population and business remain elevated, the regulator’s press release emphasizes. following the meeting, at which the key rate was immediately raised by 0.5 percentage points. The recovery in demand is gaining more and more stability and in a number of sectors outstripping the possibility of increasing output, the representatives of the Bank of Russia note.
Central Bank raised inflation forecast to 4.7-5.2% at the end of 2021… In March, according to the regulator, the annual growth rate of consumer prices increased to 5.8% (after 5.7% in February). As of April 19, annual inflation decelerated to 5.5%, which, however, is due to the high base effect of April 2020. Rising inflationary pressures are one of the reasons for the accelerated return to neutral monetary policy.
Price rise reflects sustained recovery in domestic demand, the Central Bank states: in the context of restrictions on foreign travel, household funds not spent for these purposes are partially redistributed to the consumption of goods and services within the country. According to the results of the first quarter, according to the regulator, the retail trade turnover approached the level before the start of the pandemic.
“The Bank of Russia predicts the growth of the Russian economy in 2021 by 3-4%. It means that it will return to its pre-crisis level in the second half of 2021… In 2022–2023, GDP, according to the Bank of Russia forecast, will grow by 2.5–3.5 and 2–3%, respectively, ”the regulator’s representatives emphasize.
The market expected an increase in the indicator, albeit a smoother one – only by 0.25 p.p.… Earlier, the Central Bank expressed its preference for just such a step, and a stronger increase can create a feeling of force majeure, Natalia Orlova, chief economist of Alfa-Bank, told Izvestia on the eve.
The increase in the key rate should limit inflationary processes in the medium term, ensure macroeconomic stability and create conditions for high-quality and long-term economic growth, said Denis Popov, chief analyst at PSB.
– This can help to strengthen the saving behavior of economic agents, which should limit the increase in demand.… In addition, the impact of the interest rate policy on the ruble exchange rate in the short term is likely to be neutral, since the current mood in the foreign exchange market is formed mainly by the news geopolitical background, he noted.
The effect is laid
For the ruble, an increase in the key rate is more likely a positive decision, since the national currency will become more attractive to investors.in. But in the conditions of the prevailing influence of geopolitical factors, the ruble can react only with a slight strengthening, the head of the analytical department of the Zenit bank Vladimir Evstifeev expects. He added that an increase in interest rates has a moderating effect on GDP growth and inflation… But usually the tightening of monetary policy in full reflected after two or three blocks…
The market has already won back the increase in the key rate on long OFZs: on the eve, their decline was recorded to 7.3% per annum due to information about US sanctions against the Russian national debt, Vladimir Zotov, the operational director of the UBRD treasury, told Izvestia. However, he noted that the government debt market has been growing over the past few days: the increase in the Central Bank rate will not affect it.
The financial market has pledged the key growth by 0.5 p.p., and this decision will only affect short-term interest rates, explained Rinat Kutuev, director of the Treasury of Bank Saint Petersburg. He suggested that the effect on tariffs will have a greater extent to the forecast published by the Central Bank for the first time regarding the key one.
– The upward trend in the cost of banking products will continue. Many haven’t raised mortgage rates yet… If on housing loans with state support, the increase in the key rate is compensated by a subsidy, and the interest can not be raised, then on a mortgage without state support, the cost should rise. Banks will continue to raise rates on deposits, since at the current level they are not attractive enough and the decrease in deposits in the banking system continues, – he said.
The increase in interest on deposits will outpace the dynamics of credit: against this background, the demand of the population for deposits will grow, and funds will be more actively attracted to the banking system, explained Stanislav Duzhinsky, an analyst at Home Credit Bank. Russians will save more and spend less, which will slow down the rise in prices. Now is the best time for borrowers to raise new debt or refinancing the old one at historically low rates, said Mikhail Vasilyev, chief analyst at Sovcombank.
According to forecasts of experts interviewed by Izvestia, given the sharp increase in the key in April, the Central Bank will take a break at the June meeting. By the end of 2021, the regulator will increase the key rate to a neutral range.… PSB expects it to reach 5%, Home Credit – 5-6%, Bank Saint Petersburg – 5.5-6%, Zenit – 5.5-5.75 %.