About what the market expects from the regulator of the rate hike, wrote analysts of the Department of studies and forecasting of the Central Bank in its review, “as evidenced by trends”. They noted that such market sentiment evidenced by the increased money market rates for a period from one to three months. For example, the Mosprime rate for three months rose from July’s level of 7.40–7.45% to 7.65 percent (as of end of August).
All will solve inflation
A key reference when making decisions on changing rates for the Central Bank will deliver inflation. At the end of August, the consumer price index in annual terms, rose to 3.1% compared to 2.5% in July. That is, even at the current dollar rate close to the psychologically important level 70-71 ruble inflation still hit the Central Bank target of 4%, says the analyst of “ALOR Broker” Alexey Antonov.
“The policy of the Central Bank focused on inflation targeting, so that the controller first analyzes the factors that can have an impact on inflation and the existing inflation risks can be assessed as temporary,” adds the head of the Department of experts of the stock market “BCS” Karpunin Basil.
He is convinced that inflation is still under control, so the regulator there is no need to raise rates. However, the Central Bank is certainly following the session will report on the increased inflationary risks and will indicate the possibility of a quick response and improvement rates in case of deviation from the base situation, scenario, sure Karpunin.
According to the analyst of Raiffeisenbank Denis Breaking, despite the comfortable level of inflation, the Central Bank should raise rates because of its preservation at the current level contributes to the outflow of capital from the country.
“If the ruble rate will not increase, it means that after the fed meeting in late September, which will most likely be decided to raise the dollar rate differential between the interest rates reduced. And this ceteris paribus will increase the capital outflow from Russia, as investors will be more profitable to place capital in the US and not in ruble assets with continuing risks,” — says Poryvai.
Central Bank could raise rates in connection with the weakening of the ruble. Since April, when Russia introduced a new package of sanctions, the ruble has lost more than 17% of the cost. Experts “BKS the Prime Minister” against the background of weak ruble estimate the probability of a rate hike by 25 basis points to 50-55%.
As stated in the forecast of the company, “this decision will have a significant psychological support for the ruble”.
But the effect of this measure will be short-lived. “The rate increase to 25-50 b.p. the weather on the market will not do. In order to get the ruble out of the dive, its value should be at 8.5-9%”, — said Alexei Antonov.
However, such a reversal of monetary policy may be perceived by market participants as a new signal about the loss of control over the movement of the ruble, and it will cause much more damage than good, the expert adds.
While maintaining the key rate at the current level for the ruble OFZ market and almost nothing will change, says portfolio Manager IR “ZERICH capital Management” Alexander Baulin. “The rate hike the rouble can become stronger to 65-66 per dollar — on the condition of the weakening of the sanctions rhetoric of the US” — says the financier in his review.
According to Denis Breaking, unless the US decides to expand sanctions on dollar payments of Russian state — owned banks- may be a substantial capital inflow into the country. First of all, the money back exporters who, because of fear of sanctions against state-owned banks kept the proceeds abroad. Against this background, the ruble may strengthen, however, the resumption of currency intervention by the Finance Ministry which was interrupted due to the weakening of the ruble is strengthening quickly negate.