The Central Bank kept the annual interest rate at 7.5% in its fourth meeting in a row. The regulator announced its decision with moderate annual inflation rates – the figure fell from 11.8% to 11% in February.
In the coming months, inflation will fall below 4% as the Central Bank expects. However, inflationary pressures are expected to increase. By the end of 2023, the Central Bank of Russia estimates annual inflation to be 5-7%, with a target of 4% in 2024.
Central Bank Governor Elvira Nabiullina said at a press conference after the board meeting that it is more likely to increase interest rates this year rather than lower them.
“We have signaled that we can raise interest rates if pro-inflationary risks increase. “We now see that the balance of risk has not changed, which means there is a possibility of a significant rate increase, but this is not predetermined.”
He explained that a possible rate increase in the future will aim to reduce inflation. “It is absolutely essential that loans be available, especially long-term loans,” he said.
The next meeting of the organizer is scheduled for April 28.
Banking Crisis in the West and Russia
Nabiullina also said that since February 2023, foreign economic conditions for Russia have deteriorated somewhat – “new restrictions on our foreign trade have begun to work.”
But Russia’s financial system will hardly suffer from the instability of the economic situation in Europe and the United States, including the bankruptcy of Western banks.
“We believe that the risks to the financial sector – the direct negative consequences for the financial sector – are insignificant. “This is because our financial system is less connected to the global financial system, so that’s probably the main one.” In this context, a “domino effect” is unlikely.
According to him, “monetary factors may, of course, be indirect, through the persistence of high levels of world inflation in countries, world prices and prices at which the export parity of our goods appears” – such an effect can be.
At the same time, the head of the Central Bank of the Russian Federation noted that there is “a new factor that increases uncertainty about the future course of the global economy.”
“Together, this can increase risks to the global economy, recession risks in the global economy despite the strong data we’ve seen recently,” Nabiullina said.
According to him, the slowdown in the global economy for Russia means a decrease in demand for export goods. This may cause additional pro-inflationary pressure. But lifting China’s anti-epidemic restrictions will have a positive impact on the global economy.
“For the Russian economy, this may mean intensification of mutual trade, the emergence of new opportunities for exports and imports. An additional impetus can be gained in the tourism sector,” he said.
Nabiullina also told reporters at a briefing that the Central Bank of the Russian Federation does not print unlimited amounts of money, because “such behavior inevitably leads to an increase in inflation.” “We don’t do that,” Nabiullina assured.
According to him, the growth in the money supply should be proportional to the growth of the economy, economic activity and the targeted inflation rate.
Central Bank against developers’ mortgage schemes
“As for the various mortgage plans from the developers, the cash-back tranche mortgages, we are definitely not happy with these plans, “what does he know”, as you say, I agree with that. We don’t just follow this system, [но] and we are ready to make a decision on the matter,” said Nabiullina.
A segmented mortgage is a plan in which the bank gives a loan in installments to the buyer of a home under construction and transfers the amount to the developer’s account.
Cash-back mortgages are replacing near-zero rate mortgages that are not encouraged by the Federal Reserve. With this, the buyer pays at least 15% of the cost of the apartment as a down payment. “DDU registers with Rosreestr (and this is a mandatory step that eliminates the risk of double selling) and as soon as the mortgage money is received in the escrow account linked to this agreement, 15% of the repayment amount will be refunded to the beneficiary” – writer portal mosdolshchik.rf.
The Central Bank draws attention to the increase in the share of loans extended to people with high debt burden, as well as low down payment housing loans.
“For example, the share of loans extended to people who will have to pay 80 percent of their income to loan services has increased. This is also a potentially risky system,” added Nabiullina.
Recalling that increased reserves for mortgages will be brought from the developer, the head of the Central Bank said, “on the one hand, it will be to prevent the formation of bubbles to ensure financial stability, on the other hand, it will be social security.”
“Because, according to all these schemes, people pay for this “vacation” from their wallets. Of course, we will fight these plans.
If they multiply, we will very persistently go to the Duma and propose to make a decision in which such mortgage schemes are possible only under strictly defined laws, so that there will be no deviations, because all these deviations do not benefit the borrowers. , but in many ways – These are unfair sales when borrowers are simply deceived,” he stressed.
At the same time, the Central Bank of the Russian Federation rejected the developer’s mortgage offer by the Ministry of Construction by 3-4%. The regulator explained that under this program, “exactly the same fundamental shortcomings” remain, including the same markup in the cost of housing.
“A person finds himself in the same situation: he bought a house that became cheaper the next day in the primary market, he cannot sell it, not 30%, but 10-20% cheaper, but here the situation is the same and this pledged bank remains. We do not see this as a viable option,” added Elvira Nabiullina.