The Central Bank of the Russian Federation left the interest rate unchanged at 16% annually at its board meeting on Friday. This should from a press release published on the regulator’s website.
“Current inflation pressures have decreased compared to the autumn months, but remain high. Domestic demand continues to significantly exceed opportunities to increase production of goods and services. It is too early to judge the sustainability of the emerging disinflationary trends. The Central Bank noted that the monetary policy followed by the Central Bank of Russia will consolidate the process of decreasing inflation in the economy.
Candidate of Economic Sciences, Associate Professor at the Department of Global Financial Markets and Fintech at the Russian University of Economics. GV Plekhanov Denis Perepelitsa called the expected decision of the National Bank.
“The Bank of Russia maintained its key interest rate in an environment where the risk of rising inflation persists. “Maintaining the key interest rate is therefore a compromise solution between the need to curb the rate of price growth and maintaining lending opportunities to businesses interested in a significant reduction in the interest rate to enable the expansion of production,” he explained.
Before that, former deputy chairman of the Central Bank, Sergei Dubinin guess For socialbites.ca, the key rate remains unchanged due to the fact that current inflation trends do not change.
For the second month in a row, the annual inflation rate was 7.4%, according to Rosstat.
“The rise of prices has stopped, the first signs of a slowdown in growth have appeared, but the process is not sustainable. It is common for inflation to slow down during an election cycle. However, price increases may remain high, especially in the food sector, which makes up almost 40% of the consumer basket. High household income and demand allow food producers to reflect costs into prices. Inflation is likely to be higher than market and Central Bank forecasts, said Ilya Fedorov, chief economist at BCS World of Investments. “The tariff indexation in June, which has not been realized for a year and a half, will also contribute to this,” he said.
According to him, the effect of the stabilizing measures of the Bank of Russia has not yet fully manifested itself – this happens for three to five quarters.
“Therefore, we need to expect a reduction in the key interest rate no earlier than the beginning of the second half of 2024, after the regulator evaluates the impact of the measures taken, the course of food inflation and the impact of increased tariffs on the cost of food services,” concluded Fedorov.
Perepelitsa said that as geopolitical tensions decrease, the domestic market develops and deep import substitution is achieved, the key interest rate can be reduced and the internal mechanism for determining the prices of products and raw materials can be introduced. The economist suggested that in the medium term, it is possible to gradually reduce the key interest rate to 12-13 percent in the second half of the year.
Previously eight banking analysts and one economist guess socialbites.ca maintains the key rate on February 16.