Sovcombank chief analyst Mikhail Vasiliev told socialbites.ca that the current inflation rate in the next two months, although it will slow down, will still remain high and significantly exceed the target 4% (According to the Ministry of Economic Development of the Russian Federation, annual inflation from December 20 to 26 was as follows: 12.19%).
“This, together with rising inflation expectations, will not allow the Bank of Russia to reduce the key interest rate,” Vasiliev emphasized.
According to the head of the Central Bank of Russia, Elvira Nabiullina, the key interest rate will remain high until the regulator sees “a stable trend towards a slowdown in price growth and a decrease in inflation expectations.”
Following the December meeting of the Central Bank, data on the inflation expectations of the population, which showed a significant increase, were announced. So in December, Russians expected prices to rise by 100 percent next year. 14.2% – This Highest level since March 2022 (It was 12.2% in November 2023).
“An increase in inflation expectations by itself, without accelerating existing inflation dynamics, is unlikely to lead to an additional increase in the key interest rate. “In the base scenario, the growth rate of consumer prices will slow down in the coming months due to the stabilization of the ruble exchange rate and tight monetary conditions,” Vasiliev said.
He admitted that the ruble exchange rate may strengthen in the next two months. 85 rubles per dollar – due to the seasonal decline in demand for foreign currency at the beginning of the year.
“The Central Bank’s decision on February 16 will be made according to the current economic situation and inflation indicators. That is, further dynamics of the rate will depend on the statistical information received by the regulator. The Central Bank will pause, as the full statistics of post-holiday days will be available at the end of February 2024,” added Dmitry Osyanin, associate professor of the basic department of financial control, analysis and audit of the Main Control Department of the city of Moscow REU. GV Plekhanov.
Andrei Loboda, BitRiver economist and communications director, emphasized that high interest rates slow down economic growth and that the Russian economy is just starting to recover, and small and medium-sized businesses in particular need more available financial resources.
In the risk scenario, Vasiliev allowed the interest rate to rise 17% At the meeting on February 16. The analyst explained that this may be possible if inflation does not slow down in the next two months.
What about deposits and loans?
According to Vasiliev’s forecasts, there will be no significant change in deposit and loan interest rates after February 16, as the key interest rate in the base scenario will remain at 16%.
“In January 2024, interest rates will remain at December levels. Loboda stated that the same thing will most likely happen by the end of March, as the key interest rate will remain unchanged.
After raising the key interest rate to 16%, major banks increased deposit rates. Maximum return on deposit now 16.5%.
According to the Financial Services analytical center, the average return on deposits in Russia’s 10 largest banks as of December 18 is as follows:
- for 3 months – 14.58%;
- For 6 months – 13.96%;
- For a year – 12.30%.
Banks have not yet announced an increase in loan interest rates. Average rate of consumer loans as of December 1, 2023 20.4% Annually according to the top 15 banks. At the same time, mortgage interest rates in the market may also rise. 20–21% Osyanin believes even before the meeting on February 16.
Vasiliev explained that in the risk scenario, if the key interest rate is increased to 17%, deposit and loan interest rates will increase by a similar amount in the weeks after February 16. That’s another 1 percentage point.
When will the Central Bank cut interest rates?
According to Vasiliev, The opportunity for the Bank of Russia to reduce the key interest rate will open only in June-July 2024When inflation will slow down steadily. In the base scenario, analysts expect inflation to slow down by the end of the year 6% and lowering the key rate %12.
Candidate of Economic Sciences, BCS World of Investments stock market expert Mikhail Zeltser did not rule out that the Central Bank could reduce the interest rate by up to 100 percent. 10% end of the year. According to the economist, the regulator may enter a downward cycle in April-June.
Alina Dzhus/socialbites.ca
“A stable ruble exchange rate and tight monetary conditions will contribute to a slowdown in inflation. “Overall, savers and borrowers should be prepared for the fact that this period of tight monetary policy by the Central Bank may last for a long time and the key interest rate may remain in double digits throughout 2024 and possibly part of 2025.”
When to open a deposit and get a loan
According to Vasiliev’s predictions, deposit and loan interest rates will also decrease in the second half of 2024, following the decline in the key interest rate.
Loboda suggested that if the interest rate falls smoothly and gradually, there is no need to wait for a decrease in loan and deposit interest rates until the end of 2024.
“Therefore, it is better to open a deposit at the beginning of 2024 and take out a loan at the end of the year. “Deposit interest rates may be 15-17 percent at the beginning of the year and may drop to 10-12 percent at the end of the year,” Vasiliev said.
Zeltser admitted that if there is no urgent need for a loan, it would be better to postpone it until the second half of the year, as it will be cheaper then.
What are you thinking?
Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.