The Central Bank of the Russian Federation may increase the key interest rate from 13% to 14-15% per annum at its board meeting on Friday. This forecast was given to socialbites.ca by BCS Forex analyst Anatoly Trifonov.
“In the base scenario, we expect the interest rate increase to 14 percent, but we do not exclude an increase of up to 15 percent next week if weekly inflation rates continue to remain high and inflation expectations accelerate. The prerequisites are pretty clear; “In September-October, inflation remained at a high level and is approaching 7%, which is the upper limit of the Bank of Russia’s forecast corridor for this year,” he explained.
In addition, after the publication of the preliminary budget parameters for 2024, the Central Bank noted that the new parameters would require tightening monetary policy to achieve the 4 percent inflation target in 2024. Trifonov predicts that annual inflation will be 6.8% at the end of the year, 0.5 points above the September forecast.
“The main reason for this is that demand and inflation responded slowly to previous monetary tightening,” he said.
Trifonov believes that an increase in the key interest rate by 100-200 basis points will not have a significant impact on the ruble exchange rate now, but will contribute to its strengthening in the future.
“The decision on the compulsory sale of foreign exchange earnings will also lead to a strengthening of the ruble and a decrease in inflationary pressure from import prices, but this will not be a significant factor in the decision of the Central Bank next Friday,” Trifonov added. .
He believes that the current increase in the key interest rate will be the last increase this year.
“We expect the Central Bank to start reducing interest rates in the second or third quarter of 2024. The interest rate increase in August has so far had a limited impact on the slowdown in inflation processes and economic activity. “This is because, in addition to the delay in monetary policy, market participants interpreted the Central Bank’s sharp increase as a panic response to the weakening of the ruble and expected the increase to be short-term.”
Since July 21, the Central Bank has increased the interest rate three times: by 100, 350 and again by 100 basis points. Now it’s 13 percent annually.
Previously “socialbites.ca” saidHow does the key rate affect the lives of Russians?