“Inflation is not good”: experts expect from the Central Bank to increase the key rate

The Central Bank at the meeting on October 22 will raise the key rate by 50 basic points, to 7.25%, most of the analysts surveyed by Reuters are sure . This is a maximum of July 2019. We tell you why experts expect a bet and how it can affect the economy.

What to expect from the meeting of the Central Bank

At the previous meeting, the regulator raised the rate at 25 basic points. At the same time, the rhetoric was more rigid than in July, indicates the director of the group of sovereign ratings and macroeconomic analysis Akra Dmitry Kulikov.

The Central Bank pushes the acceleration of inflation to a further increase in the rate of the Central Bank to 7.4% in annual terms, and by October 11 to 7.63%. Vegetables were made to the autumn surge in inflation, which since the beginning of the month went up by 2.7%, which is atypical for this season. Last year, for the first one and a half weeks of October, they, on the contrary, fell by 2%.

This creates a not quite clear situation before the meeting of the Central Bank, says Kulikov. According to him, additionally reacting to the temporary component of inflation may not be optimal, because the lag of the influence of monetary policy on the economy is six months or more. But if there is reason to believe that this surge will noticeably affect inflationary expectations, then the Central Bank will have to react, and strongly, adds kulikov. It predicts that by the end of the year the key rate will be 7–7.25%.

The Central Bank has still made quite stringent decisions with an increase in inflation, so it is difficult to count on its soft position, said Vasily Karpunin, head of the department of information and analytical content “BCS World Investment”. According to him, the regulator will raise the rate at 50 basic points and in the accompanying statement will again give a signal about the possibility of further increase.

The upcoming meeting will be supportive, and according to its results, the Central Bank will also update the medium -term forecast. The regulator has already increased the inflation forecast in July from 4.7–5.2% to 5.7–6.2%. It is practically guaranteed that he will do this now, the range will be increased by at least 1 pp, says Igor Rapokhin, senior strategist in the Sbercib Investment Research. He expects that the Central Bank will act decisively this Friday and will raise the rate by 0.5 percentage points (paragraphs), as well as another increase in December by 0.25 percentage points. - up to 7.5%. In a risky scenario, in his opinion, the key rate can reach 8% at the peak of the current cycle of tightening the DCP at the beginning of next year.

The inflation situation is developing according to a poor scenario - it is good that the budget is somewhat less tough than it could be, says Anton Tabah, chief economist of RA RA. It depends on how the inflation will behave in the future when the rate of increasing the rate ends. So far, there is a chance that the bet will have to be raised even at the beginning of next year-in February-March, but with a trend fracture it will be possible to stop by 7.25%, Tabah believes.

As an expected increase in the rate will affect the economy

Other things being equal, the increase in the Central Bank’s rate can affect economic growth poorly, Tabah notes. “However, in our situation, a good world situation, as well as quite high budget expenditures, can slightly disperse the economy for their part,” the expert said.

Mikhail Vasiliev, Chief Analyst of the Council of People's Commissars of the Comboned House, does not expect that increasing the key rate will lead to a significant slowdown in the economy. The bet still remains lower than the inflation level, which indicates the preservation of the stimulating effect, Vasiliev points out. If the winter does not bring new shocks of external demand, in 2022 the GDP of Russia can grow by 2.5-3% in real terms, predicts the waders.