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вторник, 3 мая 2016 г.

The reasons for high inflation at a high discount rate

The rate is no longer lifeCentral Bank left its key interest rate until June to 11%Rustem Falyakhov 04.29.2016, the Central Bank of the Russian economy saw signs of recovery growth, but still afraid of inflation. Prices crawl up in the second half of the year. Summary of concerns - the key rate remained at the same level.Russian bank on Friday decided to maintain its key rate at 11% per annum.Key motivations to leave everything as is, two. Firstly, inflation is slowing. She "has decreased significantly." The annual growth rate of consumer prices fell to 7.3% as of April 25th.
However, the Central Bank is concerned that the slowdown in inflation is temporary. Soon will come into force factors that acceleration of inflation: the indexation of wages, pensions, regulated prices and tariffs, as well as the decline in world food prices.In mid-2016 may be a temporary acceleration of the annual growth rate of consumer prices due to the low base effect of last year. But in the future, inflation will continue to fall, noted in the CB."According to the forecast of the Central Bank, the annual inflation will be about 5% in April 2017 and will reach the target level of 4% at the end of 2017", - confirmed its previous forecast for the regulator.However, the Central Bank acknowledged that there are risks associated not only with the inflation, but also to the slow decline in inflation expectations of business and the public. These risks fueled by "the uncertainty of the parameters of the state budget" and a decrease in income.The second factor that determined the decision of the Central Bank to maintain the rate, which determines the cost of borrowing for commercial banks - the coming economic growth in Russia."The shifts in the economy, approximating its entry into the phase of recovery growth. Expected transition quarterly rate of GDP growth in positive territory in the second half of 2016 - beginning of 2017 ", - stated in a press release regulator.The regulator called the factors that contribute to the restoration: develop import substitution, expanding non-oil exports, increasing capacity utilization. In general, the Russian economy has demonstrated resilience to oil price fluctuations.Do not forget to note the central bank and its modest contribution to the recovery of GDP: a floating exchange rate, shock injected in December 2014, "partially offset the negative impact of external shocks."Bank of Russia has once again promises to reopen "a gradual decrease of the key rate" on one of the next board meetings.But even at constant key rate banks will reduce interest rates on loans, "This is mainly due to the planned spending of the Reserve Fund to finance the budget deficit and, consequently, the expected transfer of the banking sector to a surplus of liquidity."The majority of experts and market participants becoming just the fact that the Central Bank will not touch rates. In order to achieve the desired target with (a guide) for inflation of 4%. Target of 4% planned to first reach by 2017, and now, judging by the statements of the head of the Central Bank Elvira Nabiullina, announced Target moves at the end of 2017.There is no doubt that the Central Bank will be able within a year three times to bring down prices. Such doubts have not only experts, but also in the Cabinet. 8 April the government approved the forecast of socio-economic development, in which the inflation (in the baseline scenario for oil at $ 40) can make in 2017 4,9%, in 2018 - 4.5% and only in 2019 - 4% . Last year, inflation accelerated to a record value of 12.9%.The government urged not to "fetish" Target inflation is 4%. "Simple solutions in the form of a public issue, the distribution of the money, and simple solutions in the form of the introduction of digital fetishes at 4% inflation", - said Economy Minister Alexei Ulyukayev.And Target of 4% is not a result of in-depth macroeconomic calculations. The Central Bank earlier explained that to put the target of 2%, as do the developed Western countries, it would be too ambitious, and the inflation rate of 6% is not low enough. Therefore, the benchmark has been chosen averaged 4%.Despite the fact that the revolutionary decision of the Central Bank, this time not waiting for intrigue remained. Market participants remember the night of December 16, 2014. Then the Central Bank raised its key interest rate to 17%. Just 6.5%, despite the fact that traditionally the Central Bank up to that point was known conservatism. Six weeks later the Central Bank started to gradually reduce the key rate. Please just 2 percentage points to 15% per annum, then in March by 1 percentage points to 14%, in early May, by 1.5 percentage points and in June by 1 percentage points to 11.5% per annum. On the last day of July the Central Bank lowered the rate by another 0.5 percentage pointsIn August 2015 the Central Bank decided to maintain its key rate at 11% per annum, taking into account "the increase in inflation risks, while maintaining a significant risk of cooling of the economy." Since then, the rate has not changed.The next meeting of the Board of Directors of the Bank of Russia, which will consider the question of the level of the key rate, scheduled for June 10, 2016.Raiffeisenbank before the announcement of the decision of the Central Bank said that the reduction of the key rate will be, "but the rhetoric has softened." "Since the last meeting of the Central Bank (18 March), the price of Brent crude oil rose from $ 42 to $ 48 per barrel, the ruble strengthened from 68 to 64 rubles. / USD., And inflation fell from 7.9% to 7.3% of / g. Also fell slightly and inflation expectations. However, for the most recent meeting of the head of the Central Bank made it clear that, given the high volatility in the currency market, one should not expect a quick response of the Central Bank on the positive dynamics of the ruble, "- said in a statement Raiffeisenbank. The forecast was justified.At the same time the bank's experts believe that lasting 2.5 months already ruble, of course, a prerequisite for more action by the Bank of Russia. A similar opinion is shared by at ING bank.Central Bank may start reducing the cycle rate since June, according to the ING. In June, may occur reducing rates by 50 basis points, and then another 150 points. As a result, the key rate could reach 9% in 2016 and to decline further to at least 7.5% in 2017 ", - says Dmitry Polevoy from ING.According to Eugene Abramovich, head of foreign exchange risk management analysis Dukascopy Bank SA, the Central Bank has taken a wait and see stance amid uncertainty about future price movements in the oil market and improve the prospects for US rates.Market reaction to the outcome of the meeting of the Central Bank is mainly moderately positive, as coincided with the expectations of the participants.But the explanation of the Central Bank at this time is a bit confusing and contradictory, says George Vashchenko, Head of Operations Department of the Russian stock market IC "Freedom Finance": "The main message of the market - readiness of the regulator to reduce the key rate in the near future, if the risk of inflation will not increase . This can be interpreted as a promise to lower the rate at a stable exchange rate. "

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