For the sixth time in a row, the Central Bank of Russia kept the key rate at 7.5% per annum. This decision was made by the Board of Directors of the Central Bank following the meeting on Friday, June 9.
According to the regulator, at the moment, annual inflation in the country is gradually accelerating. So, if in April the growth rate of consumer prices for goods and services fell to a three-year low and reached 2.3% in annual terms, then as of June 5, the figure rose to 2.6%.
"The current rate of price growth, including stable indicators, continues to increase. Households' inflation expectations and enterprises' price expectations remain elevated. Economic activity is growing faster than expected in the Bank of Russia's April forecast. This largely reflects the active recovery of domestic demand," the Central Bank said in a press release.
According to experts of the Central Bank, by the end of 2023, the annual inflation rate in Russia may reach 4.5-6.5%. Meanwhile, already in 2024, the value should return to the target 4% and will continue to remain close to this mark, the regulator predicts.
Traditionally, changes in monetary policy (monetary policy) are considered one of the main tools of the Central Bank to control inflation. In the event of a rush rise in prices, the regulator raises the rate, as a result of which borrowed money becomes more expensive for citizens and businesses, economic activity decreases and price pressure weakens. If inflation, on the contrary, slows down, the Central Bank can cut the rate to revive business and consumer activity.
In the spring of 2022, against the backdrop of large-scale Western sanctions against Moscow, inflation in Russia began to rise sharply and at some point reached 17,8% - the highest level in the last 20 years. As an anti-crisis measure, the Central Bank more than doubled the key rate (from 9.5% to a record 20% per annum), which after some time made it possible to slow down price growth.
So, in the summer, the inflation rate in the country fell below 15%, and at the end of the year it amounted to 11.9%, after which it continued to decline. As price pressure eased, the Central Bank began to gradually lower the key rate. In June 2022, the regulator returned it to the pre-sanction level of 9.5%, and in September it reduced it to 7.5% per annum and has continued to keep it at this level since then.
"Since changing the key rate is one of the heaviest instruments of monetary policy, the Central Bank applies it only in cases where it is really necessary. Now we see that the ruble exchange rate has stabilized in a certain corridor, and inflation since the beginning of the year has not yet caused much concern. Therefore, the Central Bank has no reason to make a decision on the rate right now, "Alexander Shepelev, an expert on the stock market at BCS World of Investments, explained to RT.
The next meeting of the Board of Directors of the Central Bank is scheduled for July 21. According to a press release from the Central Bank, in the future, the regulator will decide on the key rate, taking into account the dynamics of inflation, the process of structural adjustment of the economy, as well as the assessment of internal and external risks. At the same time, the regulator does not rule out some tightening of monetary policy.
"In general, the balance of risks for inflation has shifted even more towards pro-inflationary ... In the context of a gradual increase in current inflationary pressure, the Bank of Russia admits the possibility of raising the key rate at the next meetings to stabilize inflation near 4% in 2024 and beyond," the Central Bank said.
However, the experts interviewed by RT still adhere to different assessments of the prospects for monetary policy. According to Alexander Shepelev, the Central Bank may slightly raise the key rate at the July meeting. In turn, Spartak Sobolev, head of the investment strategies research department at Alfa-Forex, considers the current 7.5% to be the optimal level for the economy and does not expect changes until the end of the year if inflation does not deviate from the forecast. Meanwhile, the asset manager of the PSB Management Company, Georgy Voronkov, admits a slight increase in the rate during the second half of the year.
"In the second half of 2023, the rate may be raised, since there are now more pro-inflationary factors than disinflationary ones. I think by the end of the year it will be at the level of 8-8,25%," Voronkov suggested in an interview with RT.
Expected step
In the first minutes after the announcement of the results of the meeting of the Board of Directors of the Central Bank, the Russian currency showed ambiguous dynamics on the Moscow Exchange. Thus, the dollar rose by 0.04% to 82.63 rubles. At the same time, the value of the euro decreased by 0.14% to 88.97 rubles, and the yuan by 0.31% to 11.56 rubles.
The preservation of the key rate at the June meeting was expected, experts say. According to experts, investors in their actions took into account this scenario in advance, so the decision of the Central Bank did not have a serious impact on the ruble.
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As BitRiver financial analyst Vladislav Antonov told RT, some pressure on the Russian currency today is exerted by the uncertain situation with oil prices and the tense geopolitical situation. In addition, market participants may react negatively to reports about the preparation by the European Union of the 11th package of anti-Russian sanctions, the expert added.
According to Alexander Shepelev, in the near future, investors will closely monitor the actions of the monetary authorities of the United States and Europe. As expected, in mid-June, the Federal Reserve of the United States and the European Central Bank will also have to make decisions regarding their interest rates. An increase in these indicators may lead to a weakening of the ruble against the dollar and the euro, while maintaining values at current levels, on the contrary, can strengthen the national currency against the American and European ones.
"Thus, the dynamics of the dollar and the euro will be mainly influenced by the decisions of regulators. At the same time, the Chinese currency is increasingly affected by an increase in its share in international settlements," Shepelev added.
According to the analyst of FG "Finam" Alexander Potavin, in June the dollar will continue to fluctuate in the range of 80-83 rubles. At the same time, the euro will be traded in the corridor of 86-89 rubles, and the yuan - within the framework of 11.3-11.7 rubles, the interlocutor of RT is sure. Meanwhile, Spartak Sobolev does not rule out that within a month the value of the American currency can rise to 84 rubles, the European - up to 91 rubles, and the Chinese - up to 12 rubles. Vladislav Antonov adheres to a similar assessment.
"In June, the dollar exchange rate is likely to remain in the range of 76-83.5 rubles, and the euro in the range of 82-91 rubles. For the Chinese currency, you can designate a trading range between 10.8 and 12 rubles," Antonov concluded.