The ruble: the Central Bank determined the fate
Most of the interviewed media experts believed that the Bank of Russia at the meeting on 14 December to leave its benchmark interest rate unchanged, the minority that rate is raised no more than 0.25 p. p. In the end, consensus analysts have not guessed the decisions of the Central Bank of the Russian Federation. The Board of Directors of the Bank of Russia decided to raise the key rate to 7.75%.
Once the market is convinced that the Central Bank’s decision on the key rate key factor is the consumer price index. In November, the annual inflation rate accelerated to 3.8%, and there is a risk that by the end of the year it will exceed the government forecast of 4%. Moreover, it admits the Bank of Russia in the official comments to its decision.
CB recognizes that the official forecast may not be successful, and the real inflation by the end of the year could be 3,9%-4,2%. If at the end of 2018, inflation really will go beyond the forecasted 4%, the Bank of Russia will be able to next raise the key rate, perhaps even at the first meeting in 2019, and then, most likely, the new business year, we will begin with an interest rate at 8%.
It is also impossible to ignore the sharp drop in oil prices in November and the likelihood of introducing new, more stringent U.S. sanctions against Russia. So to return to soft monetary policy of the Central Bank of the Russian Federation is still far.
After raising the key rate, we are waiting for the increase in rates of commercial banks on credits and deposits. Borrowers, especially those who spends on debt service 30% -50% of your monthly income, of course, are not happy with the present and especially the future decisions of the financial regulator on the interest rate. But those few Russians who have savings (according to polls of sociologists, the savings is only 25% -30% of the population) will be satisfied by the decision of the Central Bank, since interest rates on deposits, too, will grow, and in anticipation of the Christmas holidays the big banks surely please its customers great offers on placement of funds on Deposit at a good rate.
But the currency market seems to not fully reacted to the decision of the Central Bank of the Russian Federation. On the announcement of the rate hike the ruble, which theoretically should grow, only strengthened against the Euro and against the dollar continues to become cheaper, but not much.
The Deputy Director of analytical Department,