The regulator raised the key rate for the first time since 2018.
If the rise in prices cannot be curbed, the Central Bank may again raise the key rate in April, according to experts interviewed by Izvestia. The regulator switched to "hawkish" monetary policy (MP) due to the growth of inflationary risks . On Friday, March 19, the Central Bank raised its key rate for the first time since 2018, raising it from a record low 4.25% to 4.5% per annum . Prior to this, the indicator was "paused" and has not been changed since July 2020. Now the Central Bank did not rule out the possibility of further rate hikes this year. Such a policy suggests that the regulator gives priority to curbing price increases before accelerating the economy, analysts say.
On Friday, the sign, which has already become a traditional indicator of sentiment in the Central Bank, was straightforward and obvious. Elvira Nabiullina adorned her outfit with a brooch in the shape of a hawk, opaquely declaring the transition to toughening monetary policy. At the last press conference after the meeting of the board of directors, the chairman of the Central Bank wore a brooch resembling a dot. In general, all the rhetoric testified to the fact that the end was put on the rate cut.
However, analysts did not expect such a quick change of course. Only a few of them predicted a “tough” scenario. Therefore, the increase in the key rate was not predicted, although the money market and the bond market have already incorporated this step into asset prices. True, given the fact that it will be done a little later.
As Elvira Nabiullina said, answering journalists' questions, the Board of Directors considered several options: keep the rate, raise it by 50 or 25 basis points. As a result, the regulator decided that the changes should be smooth.
In the phrase "You can not save, improve," Today, we have put a comma in the right place - said in a statement the chairman of the Central Bank.
The main argument in the issue of changing the course was inflation, which significantly broke away from the Central Bank's forecast , having increased by March 15 (according to estimates) to 5.8% in annual terms. In January, the figure reached 5.2%, and in February - 5.7%. As stated in the Central Bank's commentary, time is of the essence: if you postpone the rate hike, inflation may rise, but inflation expectations will not decrease. "This will push inflation further from the target and, as a result, will require a more significant rate hike in the future," the Central Bank said.
The regulator's release draws attention to several important points. First, the Central Bank allowed the rate increase at the next meetings . He also moved the timeline for inflation to return to the 4% target from the end of this year to the first half of 2022 . Which suggests that the regulator sees the long-term trend of rising prices . Although Elvira Nabiullina said that now the inflation rate is near peaks and a decrease is predicted in April due to the base effect.
Secondly, the Central Bank made it clear that additional inflationary pressure could occur due to the fact that funds in the NWF will begin to be directed to infrastructure projects. Third, restrictions on cross-border travel associated with the pandemic have led Russians to spend more domestically , rather than leaving them in the consumer market abroad.
Izvestia has already reported that purchasing activity in January was a record one. According to the research holding "Romir", citizens' spending on consumer goods in January 2021 turned out to be 12% more than a year earlier.
2 trillion rubles were not spent abroad, but directed to support the domestic economy, Elvira Nabiullina said on Friday, answering a question from Izvestia. In general, the regulator has not yet estimated the full amount of "saved" due to the lack of travel funds. Some of them, explained the head of the Central Bank, went to savings.
The experts interviewed by Izvestia accepted the regulator's decision with varying degrees of surprise. Thus, Anton Tabakh, chief economist of the Expert RA rating agency, noted that the rate hike is a little discordant with the previous statements of the Central Bank's leadership about the need for further inflation monitoring.
“Only five weeks have passed since the last meeting: not so much to draw unambiguous conclusions,” he is sure.
The expert added that the decision to raise the rate will strengthen the position of the national currency, but will not affect the food component of growth, which is of an imported nature.
According to the director of the rating service of the NRA, Sergei Grishunin, most analysts expected the rate increase not earlier than the April meeting of the Central Bank . And the fact that such a decision has been taken now testifies to the priority of the goal of keeping inflation within the target over the task of accelerating the economy.
“In addition, the increase in the Central Bank's rate indicates a clear trend of" export "of inflation from the United States and China to other emerging markets , which has already manifested itself in raising rates in Turkey and Brazil,” he continued. - And if the export of inflation from China decreases, since the stimulus program is likely to be reduced, then inflation from the United States will be exported in the form of rising prices in commodity markets, primarily metals and food.
According to Sergei Grishunin, the Central Bank signaled a faster transition to a neutral monetary policy (rate of 5-6%). As Elvira Nabiullina said in an interview with Izvestia, this can happen in a three-year period.
According to our updated expectations, the Central Bank is likely to raise the rate during 2021 to levels close to neutral, - said a spokesman for the NRA.
And if inflation cannot be curbed, the key rate could be raised by 25 basis points at the next meeting of the Central Bank's board of directors , he suggested.
Vasily Karpunin, head of the information and analytical content department at BCS World of Investments, shares a similar opinion. But if inflation starts to slow down, then the Central Bank may take a break and, for example, postpone the increase until June, he said.
The actions of the regulator are formally positive for the ruble, experts recalled.
Most likely, in the near future, the dollar rate will be in the range of 73.4–74.5 rubles, if there is no information about new sanctions. If they are purely personal in nature, the ruble is able to return to six-month highs - about 72.5 rubles per dollar, - Vasily Karpunin predicted.
And Sergei Grishunin believes that the volatility of the national currency will continue, since, in addition to the rate, geopolitical risks that outweigh everything else are seriously influenced by it. According to his forecast, if new sanctions risks are not realized, the dollar exchange rate will fluctuate in the range of 71–76 rubles.