The Bank of Russia does not intend to tighten monetary policy

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CBR is not going to raise the key rate. However, the financial regulator does not exclude that this year the pace of decline in key interest rates may slow down.
Recall that in 2017 the key rate of the CBR went down six times, the decrease amounted to 2.25 percentage points. For four months of the current year the interest rate fell by 0.5 percentage points to 7.25%. Previously, we estimated the pace of rate cuts this year by about 1.75 percentage points to 6% by the end of 2018. That is, in any case, the pace of decline in interest rates this year, according to our estimates, would be slower than in 2017.
Inflation in Russia remains low, according to recent data of Rosstat, since the beginning of the year, the growth rate of consumer price inflation slowed to 1.5%, while the price of Brent crude oil came close to $80 per barrel, which would give Russia additional oil and gas windfall in a sovereign wealth Fund.
Of course, there are many arguments in favor of the fact that the Central Bank should lower interest rates even faster decline in the rate of inflation to ensure the production of greater availability of credit. However, the reasonable monetary policy of the Central Bank of the Russian Federation allows to balance the economy, on the one hand, supporting the real sector, on the other hand, not allowing people and companies to increase the debt load that can cause new local crisis.
Increase in the key rate this year we did not expect, although the background of short-term collapse of the ruble in April, the currency market appeared panic, some government officials do not even rule out that CBR will change its moderately loose monetary policy hard, and begin to raise interest rates to prevent the uncontrolled growth of inflation.
However, the ruble is enough to quickly stop the collapse, when it became known that the threat of tougher Western sanctions against Russia, including distribution in the Russian national debt, retreated. We therefore agree with the predictions of the CBR that the reasons for tightening monetary policy in Russia today is not observed.
Natalia Milchakova,
The Deputy Director of analytical Department,