The Central Bank has slowed down - Economics - Kommersant

The Central Bank has slowed down - Economics - Kommersant



The Central Bank lowered the key rate for the sixth time in a row, choosing the smallest reduction step in the last six months - 50 basis points, from 8% to 7.5% per annum. The regulator explained its decision by a decrease in the inflation rate, which is expected to be at the level of 11–13% by the end of the year, as well as by the dynamics of economic activity, which turned out to be better than expected — now, by the end of the year, a decline in GDP is projected at the level of 4–6%. This time, the regulator did not give the markets any signals regarding its further actions on the size of the key rate.

The Bank of Russia continued a series of key rate cuts, this time reducing the step to 50 basis points - the indicator was reduced from 8% to 7.5% per annum. After the February sharp increase from 9.5% to 20%, this is the sixth consecutive rate cut. Today's decision of the Central Bank explained by lower than before inflation growth rates - in August, the consumer price index fell to 14.3% in annual terms after 15.1% in July (according to estimates on September 9, to 14.1%).

Such dynamics, according to the Bank of Russia, is associated both with one-off factors (in particular, price correction after the March surge) and, in general, with restrained dynamics of consumer demand due to a decrease in real incomes of the population and the propensity to save. “The latter, in particular, is explained not only by general economic uncertainty, but also by the reduced supply of certain categories of goods and services,” the regulator clarifies, noting that restrictions on the supply side have already eased somewhat against the backdrop of a gradual recovery in consumer imports.

“The decline in annual inflation will continue, including under the influence of the base effect, despite the expected further increase in current price growth rates,” the Central Bank notes. As a result, by the end of the year, the regulator expects inflation to decrease to 11–13%, in 2023 to 5–7%, and in 2024 to 4%. The risks for such a development of events are largely related to the volatility of the ruble exchange rate, as well as the dynamics of inflation expectations - as long as they remain at an elevated level.

At the same time, the Central Bank adds, “significant pro-inflationary risks may also be created by further strengthening of external trade and financial restrictions” - their influence may lead to a greater than expected reduction in the potential of the economy.

Assessing the economic situation in the country, the Bank of Russia states that external conditions remain difficult and significantly limit economic activity. However, the dynamics of business activity turned out to be better than July expectations (with heterogeneous trends in the sectoral context). Difficulties in production and logistics continue to have a negative impact on activity, however, according to the Central Bank, citing survey data, business sentiment is improving as suppliers and markets diversify. By the end of the year, the decline in GDP may be in the range of 4-6%.

At the same time, the Central Bank emphasizes that the further dynamics of both inflation and the economy as a whole will depend on budget policy - we recall that the government is now completing a discussion of the draft budget for the next three years (see "Kommersant" from 13 and fourteen September).

In the event of an additional expansion of the budget deficit, the Bank of Russia warns, a tighter monetary policy may be needed to bring inflation down to 4% in 2024.

Regarding further actions regarding the key rate, this time the Central Bank did not give a signal to the markets, limiting itself to the basic wording: “The Bank of Russia will make further decisions on the key rate, taking into account the actual and expected inflation dynamics relative to the target, the process of structural adjustment of the economy, as well as assessing the risks of aspects of internal and external conditions and the reaction of financial markets to them.

Evgenia Kryuchkova



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