“We are probably talking about some kind of pause” – Kommersant FM

The Central Bank raised the key rate to 16%, the board of directors decided to raise the figure by 100 basis points. How did the regulator explain its decision? And why does the Central Bank continue to tighten monetary policy? For details, see Kommersant FM economic observer Konstantin Maksimov.

— What can you mainly pay attention to in the statement made by the regulator? Current inflation pressures remain high, as noted. By the end of 2023, annual inflation is expected to be near the upper limit of the forecast range of 7-7.5%. At the same time, the GDP growth rate, according to the Bank of Russia, will be higher than the October forecast and exceed 3%.

And then comes the phrase, which probably explains the fact that the step was exactly 100 basis points and the rate was increased to 16%, and not higher. The Central Bank says that the upward deviation of the Russian economy from the balanced growth trajectory in the second half of 2023 turned out to be more significant than the regulator’s estimates in October. Among other things, it is noted that in certain segments of the credit market there are signs of a slowdown in activity.

Thus, the Central Bank makes it clear between the lines that the economy has adapted, the GDP growth rate turned out to be even better than expected, and, therefore, the high rate is no longer such a hindrance.

That is, further inflationary expectations of the population and price expectations of enterprises have increased, it seems that we need to fight them, but there is no such urgent need for this. At least that’s how I see it. At the same time, the average price increase for October-November, adjusted for seasonality, according to the regulator, was 10% annualized.

At the same time, the return of inflation to the target in 2024 and its further stabilization around 4% imply a long period of maintaining tight monetary conditions in the economy. That is, there are no prerequisites for us to see a reduction in the interest rate. For now we are probably talking about some kind of pause.

In general, the Central Bank says over and over again that annual inflation is still close to the upper limit – 7-7.5%. It turns out that if ultra-inflationary moments are not observed in the future, if the inflation expectations of the population somehow change, then the Central Bank may proceed to some gradual slowdown in the interest rate.

Now I have a feeling that we have reached a certain ceiling. If the Central Bank saw the threat of inflationary pressure, I believe that it would have made the key rate higher than 16%. It’s hard to call it a consensus; let’s say, this is a decision from the category of “both ours and yours”: it seems like the key indicator was raised, but for once the Central Bank took the step that the market was waiting for. This has not worked out before; many even said that the Central Bank of the Russian Federation is one of the most unpredictable regulators this year.

At the same time, his decision is receiving a very positive reaction in the market. Among other things, we see almost a return to 3000 points, and this is taking into account the current pressure of LUKOIL in the Moscow Exchange index

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