The Central Bank did not change the policy rate for the third time – at 7.5% 13:31

The Central Bank left the policy rate unchanged for the third time at 7.5% per annum. This decision was taken by the financial regulator after the Board of Directors meeting held on February 10. The key rate of 7.5% is effective from September 16, 2022.

“Current price increases are increasing, but remain moderate in terms of sustainable components. Inflationary expectations of the population and businesses declined, but remained high. The dynamics of economic activity is better than the Central Bank of Russia’s October forecast. While the population is still cautious about consumer behavior, there are signs of recovery in consumer activity. In a press release issued after the meeting, the Central Bank announced that the acceleration of budget expenditures, worsening foreign trade conditions and the situation in the labor market increased the pro-inflationary risks.

The Central Bank of Russia will take further decisions on the key rate, taking into account the actual and expected inflation dynamics related to the target, the economic restructuring process and the risks arising from domestic and external conditions, and the response of financial markets. to them. The regulator said that as pro-inflation risks escalate, the Bank of Russia will evaluate the feasibility of raising the key rate at subsequent meetings.

Earlier, financial analysts had predicted that the key rate would remain at the current level at the February 10 meeting.

SberCIB Investment Research senior debt market strategist Igor Rapokhin emphasized that in January this year, inflation was lower than in the previous year and stood at 0.7-0.8% per month. At the same time, sustainable price increase indicators, in which the effects of temporary and one-off factors are softened, fell below 4% on an annual basis.

Therefore, Rapokhin said, according to him, it is unlikely that the regulator will increase the rate at the meeting on February 10.

Sovcombank chief analyst Mikhail Vasiliev also said that pro-inflationary risks have increased since the last meeting of the Central Bank on December 16, so there is no reason to lower the rate.

The exchange rate of the ruble against the dollar weakened by 8 percent, falling from 65 rubles to 70 rubles per dollar. At the same time, Brent oil prices fell and the discount on Ural oil was extended due to sanctions. The increase in the budget deficit to 3.2 trillion in 2022, above the market expectations, also contributed to the increase in prices.

First, the Central Bank has consistently raised the key interest rate. The increase cycle started at 4.25% annualized in March 2021. In March 2022, it reached a record level of 20% per year. Then the Central Bank began to cut key interest rates. From March 18 to September 16, the rate was reduced by 12.5 percentage points to 7.5% per annum. The rate remained at this level at subsequent meetings in October and December.