Central Bank reduced the key rate • The Bell • RIMA

Central Bank reduced the key rate

The Central Bank today reduced the key rate by 0.25 percentage points, to 6.25%.

What happened

The Central Bank reduced the key rate by 0.25 percentage points After a decrease by 0.5 percentage points at the end of October.

The regulator has substantiated the decision by a faster compared to the expected slowdown in inflation with a predominance of disinflation risks. “Given the conducted monetary policy, annual inflation will be 3.5–4.0% in 2020 and will remain near 4% in the future,” the Central Bank expects.
The growth rate of GDP on the results of the year may develop closer to the upper boundary of the Central Bank forecast range - 0.8–1.3%. It is difficult to assess the stability of such growth, the Central Bank admits.
The regulator intends to assess the feasibility of further reduction in the rate in the first half of 2020.

What you need to know about the current decrease

Since June 2019, the Central Bank reduced the rate for the fifth time. The last time, October 25, it was reduced immediately by 0.5 percentage points. Before today's decision of the regulator, analysts said that for the first time in several years they could not confidently predict his decision.

This was also shown by the consensus of Bloomberg: although 26 out of 33 analysts predicted a decrease by 0.25 percentage points, four were waiting for a pause in a decrease in the rate, three - reducing by 0.5 percentage points immediately.

What's next

After a decrease in the bets of the Central Bank, it should be expected to reduce deposit and credit rates by Russian banks, which has already happened repeatedly this year. The average mortgage rates are likely to really approach 8%.

Any hint of the Central Bank to replace politics would frighten foreign investors who invested about $ 45 billion in the Russian OFZ in the amount and $ 16 billion from the beginning of this year.

Sickness than expected, the policy of the Central Bank provoked a rally in the Russian stock market. The Chairman of the Central Bank Elvira Nabiullina explained the strengthening of the ruble, which became one of the best assets of the year, with the interest of investors in countries with emerging markets.