This week will be a meeting of the Bank of Russia on issues of monetary policy. Overall, there was good conditions for a rate cut, but experts are not sure that the regulator will decide on some steps.
Reuters conducted a poll of 22 economists, the vast majority of them (18) expects to save the settings of monetary policy and the rest to reduce the key rate by 50 basis points.
Often there is a view that the Bank of Russia will change the tone of its statements, simply put, will give the market a hint at a likely reduction at the next meeting.
“The CBR is expected to keep rate on March 18, but will likely soften the rhetoric in the statement,” he told Reuters Anatoly Shawl from JP Morgan. Similar position was voiced in the Bank and ING. “We think that the lower the rate will not be: it would be foolish for three months two times to radically change the tone,” – said Dmitry Polevoy.
Indeed, a rate cut now would mean some inconsistency of the Bank of Russia. If you go back a couple of months ago and remember the statements by the regulator after the January meeting, then do was allowed a rate increase due to the deviation of inflation from the target range. However, now inflation went down rather quickly, and the volatility of the financial markets is so great that the Central Bank may change opinion every month. For example, during February oil prices rose by about 45%.
In early March, first Deputy Chairman of the CBR Ksenia Yudaeva said that the Central Bank is concerned about inflationary risks and expectations.
Despite the improvement in the internal and external environment, representatives of the Central Bank of Russia recently expressed rather hawkish stance: and Elvira, and Yudaeva spoke about the increased inflationary risks as the main obstacle to further policy easing, Reuters said Alexei Pogorelov from Credit Suisse.
In addition, there are a number of things that will force the CBR to refrain from policy easing.
First, it continued the work on amendments to the Federal budget in light of the recent drop in oil prices. The uncertainty over fiscal policy will become the main source of inflation risks at the end of this year.
If we talk about inflation, then there should not be forgotten, as we have already said that from 1 April increased the excise tax on gasoline, which will add, by estimations of experts, to inflation at least 0.5%, although at the head of the Central Bank of Mrs. Nabiullina assessment other – 0,3%
However, fuel prices started to grow. On average in Russia since the beginning of March, gasoline prices rose by 0.3%, or 9-10 copeck for the first time since mid-October 2015, reported “Interfax” with reference to Rosstat.
“We believe that in its statement the CBR will signal their intention to cut rate at one of its subsequent meetings (this sentence was omitted from the press release in January). In our view, the decision to leave interest rate unchanged to support the ruble, the continuing stability of which can lead to policy easing at the meeting in April,” – said Pogorelov.
If still to consider easing of monetary policy, it is worth noting that the situation for this more than adequate. Yet the fact that in a month, oil prices again fall. In addition, it is worth noting the positive liquidity situation: rates on the interbank market reduced, without external intervention of the regulator.
The spreads between FRA and Mosprime shows that the market expects a rate cut in March.
“This may be the decision from the “if not now, when” – says Denis Davydov from Nordea.
At a convenient point to reduce the rate of the Central Bank pointed URALSIB analysts.
“Taking into account the latest changes in the markets, namely the inflation rate is 8%, oil to $40, while the ruble – 69-70 per dollar, the Central Bank may reduce its key interest rate by 50 points on March 18,” said Olga Lapshina from the Bank “Saint-Petersburg”.
Some analysts, speaking of the saving rate in March at 11%, and allowed for the rate reduction.
“I expected to keep rates unchanged, although – given the rally in oil and the ruble – should not be surprised if the Central Bank decides to cut rates,” said Vladimir Tikhomirov from the BCS.
Note also that the meeting of the Bank of Russia will be held immediately after the meeting of the Federal reserve system and, quite possibly, by the time the oil market the situation is going to change. We’re already seeing a slight correction, which is likely to be continued, and the quotations of grade Brent falls to near $36 per barrel, but this decline from the highs of 12%.
