Analyst Osadchy gave advice to Russians on preserving their savings: how to respond to a rise in the key rate

The rapid growth of the key rate in Russia continues: from July 24 it was increased from 7.5% to 8.5%, from August 15 – to 12%, and from September 18 – to 13%. Moreover, the Central Bank does not rule out a new increase before the end of the year. This financial indicator essentially determines the price of money in the economy, and therefore concerns everyone. Maxim Osadchiy, head of the analytical department of BKF Bank, told MK exactly how the rise in the key rate will affect the lives of citizens.

— Will Russians feel another increase in the key rate?

– Of course, and with your most sensitive “organ” – your wallet. The first thing that will be noticed is the continued growth of rates in banks, both on loans and on deposits. By the way, deposit rates in the market as a whole have not yet managed to catch up with the previous increase in the key rate: from 8.5% to 12% from August 15. Thus, the maximum interest rate on deposits in rubles of the country’s ten leading credit institutions increased from the first ten days of August to the first ten days of September from 8.1% to 9.7%.

— In your interview with MK a month ago, you noted that poor Russians are “through the roof” with debt, and they have few or no deposits. While the rich, on the contrary, have deposits through the roof. So, raising rates will hurt the poor, but benefit the rich?

— Absolutely right, the Matthew effect, known in ancient times, works: “The rich become richer, and the poor become poorer.” The poor have no savings, but they have debts. The pressure on the poor is especially noticeable in the segment of unsecured consumer loans. Moreover, from August 16, the Central Bank of the Russian Federation abolished the restriction on the full cost of a consumer loan and certain types of loans until the end of 2023. If this restriction continued to apply, then bankers would not be able to increase the rate in the 4th quarter above 49% on non-target consumer loans for a period of up to 1 year and up to 30 thousand rubles. And now they can. And only God knows how microfinancers will raise rates after the restrictions are lifted!

— What will happen to the mortgage?

— The dissonance between the preferential mortgage rate (8%) and the key rate (13%) has intensified. Since market mortgage rates rise following the key rate, the demand for market mortgages will decrease. Preferential mortgages will continue to “cannibalize” the mortgage market, but only in the segment of primary housing, since it does not apply to secondary housing. Raising the down payment from 15% to 20% and reducing bank subsidies by half a percentage point will weaken this process, but will not reverse it. Increased demand for preferential mortgages may be facilitated by the fact that this program is expected to end on July 31, 2024.

— What other impact will an increase in the key rate have on the deposit market?

— High rates contribute to an increase in the volume of deposits, and savings accounts are beginning to be replaced by deposits. The process of devaluation of savings may accelerate.

— How will the latest decision of the Bank of Russia affect the economy as a whole?

– Of course, depressing. Tightening monetary policy and raising the key rate means cooling the economy, and the transition to a double-digit key rate means freezing it altogether. An increase in loan rates increases the costs of enterprises; they stop investing in expanding production and modernization. With double-digit rates, many industries become unprofitable. But the Central Bank does not have the task of stimulating economic growth. The main task of the regulator is to fight inflation. So that it doesn’t work out like in Turkey. And there, let me remind you, in order to fight inflation, which had already reached 60%, the local central bank was forced to increase the key rate to 30%. So the Central Bank of the Russian Federation is pressing the brakes, although our economy is already stagnating.

— Since, according to you, it is becoming more difficult to run a business, then we shouldn’t expect an increase in wages for those who work there?

– But no. In July, the average monthly salary increased by 14.8% year-on-year and continues to grow. The fact is that there is a shortage in the labor market, including due to the partial mobilization that took place last year and the mass exodus of Russians abroad. Therefore, wages in general are rising. Although not for everyone, of course.

— In its macro forecast, the Central Bank expects the average key rate to be 13%–13.6% from September 18 to the end of the year. What does this mean for Russians and for the economy?

— From this forecast it follows that the regulator itself does not rule out another increase in the key rate before the end of the year. Moreover, before this time there are still two regular meetings of the Board of Directors of the Central Bank of the Russian Federation – on October 23 and December 18. Meanwhile, despite the efforts of the regulator, inflation continues to accelerate. In particular, due to the collapse of the ruble.

— Will the actions of the Bank of Russia affect the ruble?

— Of course, tightening monetary policy helps to strengthen the national currency. We saw that a sharp increase in the key rate in August stopped the collapse of the ruble. However, there are powerful factors acting in the opposite direction, contributing to the devaluation of the ruble. This is, firstly, an increase in demand for foreign currency due to an increase in imports and a decrease in exports. Secondly, the “printing press” is working at full capacity, which is not surprising given the huge federal budget deficit, which reached 2.4 trillion rubles in 8 months of this year.

— Why are you so confident in the uninterrupted operation of the “printing press”?

—The volume of cash in circulation, taking into account balances at the cash desks of credit institutions, increased by 29% for the period from September 1, 2022 to September 1, 2023. The conclusion is not difficult to draw.

— How can Russians preserve their cash savings under such conditions?

— Taking into account the expected increase in the key rate, it is reasonable to open deposits in rubles for a period of no more than six months. And it is still unwise to open deposits in Russian banks in foreign currency – due to the continuing restrictions imposed by the Central Bank of the Russian Federation. After all, payments from such a foreign currency deposit will be made in rubles at the bank’s internal (that is, arbitrary) exchange rate. Investments in “physical” gold are becoming more and more attractive for Russians. But you can wait with investments in real estate due to the expected end of the preferential mortgage program.