ShareAnnual inflation in Russia has fallen significantly below 3%. According to the Ministry of Economic Development, in the week from April 18 to April 24, this figure fell to 2.55%. It would seem that the rate of price growth is miserable, it’s time to soften the monetary policy, then cheap money will pour into the market and we, as they say, will live. But no matter how.
Analysts told Fontanka what the Bank of Russia will actually rely on when making the next decision on the key rate and why it will most likely leave it at 7.5% again.
The Central Bank in its decisions focuses primarily on inflation indicators and inflation expectations. The first in annual terms fell below 3% and will continue to decline. Month by month, inflation slowed down in March, from 0.46% in February to 0.37%. Seasonally adjusted, it slightly accelerated (from 0.27% to 0.29%), but in general, the average monthly seasonally adjusted price growth rate is close to 4%.
Inflationary expectations of the population are falling for the second month in a row. In April, they fell to 10.4% and returned to the upper end of the range from the second half of 2017 to 2020. At the same time, the price expectations of enterprises increased, mainly due to the increase in the cost of raw materials, materials, components and changes in the exchange rate.
“The current inflation seems to hint to us that the Central Bank of the Russian Federation may express its readiness to resume the rate cut. However, statements by representatives of the regulator do not directly indicate this. Moreover, it has been repeatedly emphasized that pro-inflationary factors still prevail over disinflationary factors,” notes Andrey Kochetkov, a leading analyst at Otkritie Investments.
He explains that the low inflation in March and April of this year was just a consequence of last year’s high base effect. It was in March-April that the rapid rise in prices caused by sanctions shocks occurred. At the same time, now inflationary risks are already associated with rising prices for recovering imports, as well as the impact of a shortage of personnel, which leads to an increase in wages in some industries.
No, there is nothing wrong with wage growth in itself, but in conditions of shortage, an employer can pay more for the same amount of work, thus inflation is accelerated.
“Therefore, we assume that at the meeting on April 28, the Central Bank of the Russian Federation will not change the rate, but may indicate its future actions by changes in rhetoric,” the expert suggests.
“Everyone is waiting for a break. And in general, this is a consensus view, but it seems to me that the issue is in rhetoric. Judging by economic indicators, the room for a rate cut has declined significantly in the last month, because all credit markets are growing very quickly, the rate has shifted to values weaker than 80 [рублей за доллар]. It was still a fairly rapid weakening, ”says Natalia Orlova, chief economist at Alfa Bank.
She assumes that the Central Bank will either leave the rhetoric the same or toughen it up. But this does not mean that a rate increase should be expected at the next meeting.
“Indeed, the current inflation has slowed down a lot, it is below three percent, and in a sense this will affect inflation expectations. But still, if we talk specifically about the factors that will affect the state of supply and demand over the horizon of the next twelve months, then they have become really more pro-inflationary, ”she notes.
Mikhail Zeltser, an expert on the stock market at BCS Mir Investments, also draws attention to pro-inflationary risks that remain against the backdrop of a strong weakening of the ruble. This is important in the context of recovering imports. “That is, the effect of imported inflation has not yet been taken into account, and it is hardly worth considering the possibility of reducing the key rate,” he concludes.
“And the lack of a signal from the regulator for easing and even hints of the possibility of some contraction,” he continues, “in theory should lead to a moderate increase in rates on the credit and deposit market. That is, OFZ yields are up, their prices are down, and annual deposits can come to a rate of 8%. Now, according to him, the average rate in the top ten banks is 7.67%.
The option of lowering the key rate is practically out of the question now, says Olga Belenkaya, head of the macroeconomic analysis department at FG Finam. As Central Bank Chairman Elvira Nabiullina said, in order for there to be room for further rate cuts, pro-inflationary risks must be reduced.
“The intrigue, in our opinion, is whether the tough signal of the last two meetings will remain unchanged or its tone will be slightly adjusted,” the analyst emphasizes, leaning towards the fact that, most likely, like last time, the rate will remain unchanged. level.
The same opinion is shared by Daniil Bolotskikh, an analyst at Tsifra Broker (ex-Freedom Finance). According to him, an additional factor that could have an impact on inflationary dynamics would be the weakening of the ruble, but now it is not observed.
“In addition, if you rely on market data in your forecast, then the Moscow Exchange Government Bond Index (RGBITR) is now only 0.5% higher than the values of the last meeting of the Bank of Russia. This means that the market does not expect changes in the key rate at the upcoming meeting,” the expert is convinced.
As for the future decisions of the regulator on the key rate, Daniil Bolotskikh believes that the medium-term forecast of the Central Bank can be used to evaluate them. In his forecast of February 10, a range of 7-9% per annum was indicated. At the upcoming meeting, a new forecast is expected before the end of the year.
“In terms of how the data is changing, I think that now the growth rate of the banking sector will be under great attention,” says Natalia Orlova. – Actually, it is connected with economic activity. There is an impression that somewhere since March, the economy began to somehow recover faster along the current trajectory. Whether this is due to the fact that budget money has reached the projects, or whether it is due to the fact that those foreign companies that were in a certain frozen state, having passed to new owners, began to finance projects more actively, it is difficult to say here. Or in general, this may be due to the fact that China has opened up and trade flows with it have recovered. It’s hard to guess here, but it’s a fact.”
Evgenia Gorbunova, Fontanka.ru
