The Bank of Russia published resume discussions of the key rate during the “week of silence” and the meeting of the Board of Directors itself, following which a decision was made to maintain the “key” at 21%. There is enough interesting in it.
As noted in the document, price growth in October-November averaged 11.1%, with seasonal adjustment in annual terms (in the third quarter this figure was 11.3%). Stable inflation indicators, although they changed in different directions, were for the most part growing.
As a result, core inflation in the first two months of the fourth quarter increased to 10.9% on average (from 7.6% in the third quarter). And at the beginning of December it was again at a high level.
A bad harvest, an increase in tariffs for communication services, as well as the weakening of the ruble contributed to this. In addition, “increasing inflation pressures at the sustained end reflect the overheated demand that has been building for much of this year.”
At the same time The tightening of monetary conditions undertaken by the regulator in recent months has not yet had time to affect price dynamics. But the rise in inflation expectations, which leads, among other things, to increased demand and accelerated inflation, has taken place.
As noted in the document, domestic demand made the main contribution to the continued rapid economic growth. Its increase was due to increased income, fiscal stimulus and high lending rates in recent months. Against this background, a positive output gap was observed (one of the inflation indicators). In addition to demand, it could be affected by new sanctions, which further complicated logistics and increased the cost of supplies, which impacted the ability to expand production capacity and use new technologies.
Among other things, the growth in the supply of goods and services continued to be hampered by labor shortages. But here, in the darkness of the tunnel, there seems to be a glimmer of light: in some enterprises (and even in certain industries), the labor shortage is decreasing. And the personnel can be used by other employers. But overall, labor shortages remain severe, contributing to limiting the growth of the supply of goods and services. And the rate of wage growth (many employers, however, assure that in the future they will no longer raise them at such a high rate) does not correspond to the growth in labor productivity.
Experts also found signs of a slowdown in economic activity, including weakening investment demand, a slight decline in production plans and a tendency to postpone new projects to a later date.
As for another painful issue – unsecured lending, there is progress in solving it. Interest rates on loans have increased significantly, and the requirements for borrowers and risk assessment criteria have become more stringent (and even stronger than the regulator expected). In general, lending growth rates have noticeably decreased in all market segments.
But the number of savers and the volume of funds placed on accounts against the backdrop of banks introducing high-yield savings products to the market have increased.
“It is worth noting, however, that after the Central Bank’s decision to maintain the rate, large banks began to lower interest rates, and small ones began to increase them, hoping to attract depositors’ money and strengthen their own liquidity,” financial consultant Ilya Demshchikov noted to RosBalt.
It is noteworthy that the income of the population in the last quarter of the year made it possible, simultaneously with the development of savings strategies, to maintain high growth rates in consumer lending.
And yet, the Central Bank believes, given the significant increase in interest rates for end borrowers and the cooling of credit activity in the economy, the prerequisites have been formed for the resumption of disinflation, despite “increased current price growth and high domestic demand.”
However, the regulator concluded that “annual inflation will continue to rise in early 2025 and is likely to peak in April.”
According to the Bank of Russia, the current rate of price growth will begin to decline in the coming months, and this process will intensify as the effects of a significant tightening of monetary conditions manifest themselves, despite the increased current price growth and high domestic demand. A significant disinflationary factor next year will also be the normalization of fiscal policy and a return to the formation of budget expenditures in accordance with the budget rule.
“Of course, it cannot be ruled out that at the next meeting the Central Bank will nevertheless raise the key rate to 22-23%. However, it is possible to maintain the current level while simultaneously continuing to cool the lending market using macroprudential methods. At the same time, I still believe that by the end of 2025 the rate will drop to 16%,” Ilya Demshchikov expresses his opinion.
Elena Dudina
Source: www.rosbalt.ru
