Experts gave an unexpected forecast about the Central Bank key rate

Analysts who took part in the Bank of Russia survey worsened their expectations for the key rate for the current year. In their opinion, this figure will average 14.5%, although a month ago experts expected that by the end of the year it would be 13.9%. Inflation for this year will also be higher than expected and will be at 5.2%. Exports and imports will also decrease, and the average US dollar on the stock exchange will be 91.2 rubles. What is the reason for the deterioration in the expectations of respondents of the Central Bank of the Russian Federation and what decision will the regulator make on the rate next Friday, March 22, MK found out from experts.

It is curious that despite the pessimism of the analysts surveyed, the Central Bank of the Russian Federation itself is not trying to exaggerate the situation. Thus, the statements of the first deputy director of the monetary policy department of a financial organization, Andrei Gangan, made at the communication session of the Bank of Russia and business in Novosibirsk attracted a lot of attention. “In the next three years, the average key rate will not be 16% (as it is now), it will be about 10%, even less,” he said. According to the official, ultimately, raising the key rate to 16% makes it possible to quickly reduce inflationary pressure. And this, in turn, makes it possible to quickly reduce the key rate.

As can be seen from the words of the representative of the Central Bank of the Russian Federation, the regulator looks at the prospects of the Russian economy realistically and sees no reason for worsening expectations. Accordingly, the question arises as to what could have so alarmed the analysts surveyed by the Bank of Russia that they revised their forecasts for the worse for everything at once – inflation, the rate level, exports and imports. There is a version being discussed on forums and on social networks that the situation on the domestic fuel market could be such a factor. Let us recall that since the beginning of the year there have been 11 attacks on domestic oil refineries related to oil refining. The total capacity of the plants whose activities were affected by this exceeds a third of the production of petroleum products, including gasoline and diesel fuel. And if there is a shortage of fuel on the domestic market, then prices will begin to rise, although the government has already given an official comment that it will not allow such a development of events. However, reality is still in no hurry to obey the orders of the authorities. Thus, in just one day – March 15 – due to an attack by Ukrainian drones on Russian refineries, the wholesale price of gasoline on the St. Petersburg International Commodity Exchange exceeded 60 thousand rubles per ton of AI-95, which happened for the first time since September 2023. Other types of fuel have also become more expensive, in particular AI-92 gasoline and diesel fuel, but their prices have not reached record levels. The listed sad events have not yet affected retail prices, but it is easy to imagine what will happen if the situation with attacks on refineries continues. An increase in the cost of fuel is always reflected in prices, which will lead to inflation, which the Bank of Russia will definitely pay attention to and will try to slow it down by increasing the key rate. What decision will the Central Bank make on this indicator at the next meeting of the Board of Directors on March 22 and how will it affect our financial market? MK addressed this question to analysts.

Natalya Milchakova, leading analyst at Freedom Finance Global:

“We believe that the board of directors of the Central Bank of the Russian Federation at its meeting on March 22 will again maintain the current key rate of 16% per annum. This will most likely be due to the fact that at the end of February, according to Rosstat, monthly inflation has already shown a tendency to slow down, even despite the acceleration of the annual rate. And in the first week of March, weekly inflation even slowed to almost zero. In addition, high interest rates are a risk factor for economic growth, as they reduce the access of many enterprises, especially small and medium-sized enterprises, to financing, and the Bank of Russia will probably also take this factor into account.

We consider the option of raising the key rate at the March meeting to be extremely unlikely, but still not zero. If this week, for example, some kind of “black swan” arrives, which will collapse, say, oil below $60, and the dollar will inflate much above 100 rubles, in this case the key rate will be increased by at least 0.5-1%. We do not expect a reduction in the key rate until the fall. Our base scenario assumes that if nothing particularly terrible happens for the Russian or global economy, the key rate will remain at the current level of 16% per annum until September.

For the ruble, what will most likely be important is not the decision on the key rate itself, but the nature of the regulator’s accompanying comments. Most likely, over the next week the dollar will fluctuate in the range of 90-93 rubles, and the euro in the range of 98-101 rubles. The decision to maintain the key rate will certainly have an impact on inflation, but prices will not slow down immediately. A significant effect on inflation of decisions already made on the key rate will not be achieved until the summer. Maintaining the key rate at the current level will mean that interest rates on neither deposits nor loans will not fall, but also will not rise. This situation will be favorable for depositors, but future borrowers, unless they are going to take out a preferential mortgage, will have to wait for loans at least until the fall.”

Vladislav Antonov, financial analyst at BitRiver:

“I expect that the decision on the key rate on March 22 will remain the same – to keep it at 16% per annum. Although weekly price growth slowed, annual inflation remained virtually unchanged. A sustained decline towards 4% will require a longer period of maintaining tight monetary policy conditions.

The duration of the period of high inflation will depend on the speed of recovery of refineries damaged by drone attacks. Western sanctions and a shortage of imported components may complicate repair work. The share of gasoline in the Russian consumer basket is small, but rising prices for it threaten to have an indirect impact on the cost of many other goods due to increased transportation costs.

If the authorities introduce a ban on the export of petroleum products in order to redirect them to the domestic market, this may help contain the rise in gasoline prices within the country, but will negatively affect budget revenues. Overall, inflation is expected to rise by several percentage points, primarily due to higher gasoline prices. The duration of the period of high inflation will depend on the timing of the restoration of refineries and government measures to regulate the petroleum products market.”

Mikhail Vasiliev, chief analyst at Sovcombank:

“In the base scenario, we expect that the Bank of Russia at its next meeting on March 22 will keep the key rate at the current level of 16%. Inflation has begun to slow in recent months, but is still at levels well above the 4% target. Therefore, the Central Bank will likely continue to hold the current high rate of 16% until it is confident of a sustained decline in inflation and inflation expectations.

We forecast inflation at the end of the year at 6%; the consensus of market analysts expects inflation to be around 5%. Therefore, the Bank of Russia may prefer to tighten monetary policy now to try to return inflation to target by the end of this year.

Annual inflation, according to Rosstat, rose to 7.7% in February from 7.4% in January. We believe that annual inflation will continue to rise in the coming months and will peak at approximately 8.3% in July – after the indexation of housing and communal services tariffs by almost 10%. By the end of the year, we expect annual inflation to slow down to 6%. In our base case scenario, we expect consumer price growth to continue to slow in the coming months due to the stabilization of the ruble exchange rate and tight monetary conditions.

At the same time, the slowdown in current inflation rates will occur slowly due to a number of pro-inflationary factors. Pro-inflationary factors are the shortage of personnel in the labor market and rapid growth of wages, soft budget policy, geopolitical risks and risks of a weakening ruble, increased inflation expectations of the population and business, and continued active lending, including within the framework of a large number of preferential programs.

In general, both savers and borrowers should be prepared for the fact that this period of tight monetary policy may be lengthy, and the key rate may remain in double digits throughout 2024, and possibly most of 2025.

The results of the Bank of Russia meeting on March 22 will not have a significant impact on the ruble exchange rate. In the coming weeks, the dollar will trade in the range of 90-94 rubles, the euro in the range of 98-103 rubles, and the yuan on the stock exchange will fetch 12.5-13 rubles.

Overall, we expect deposit rates to remain close to current high levels in the coming months. And we consider current deposit offers to be beneficial for depositors, since the key rate, according to our estimates, is now at its peak level in this cycle.”