The Central Bank intends to further tighten monetary policy: what will this lead to?
On July 26, a meeting of the Board of Directors of the Central Bank will be held, at which the issue of the key rate will be decided. There is practically no doubt that it will be raised this time. Deputy Chairman of the Central Bank Alexei Zabotkin stated at the beginning of July that the arguments in favor of raising the key rate have become stronger, and the arguments in favor of maintaining it have noticeably weakened. «MK» asked the expert — how can inflation, which has been picking up the speed of the courier train since the beginning of the year, decrease?
Perhaps there has not been such a stir in the economic community for a long time. It’s been so long since the Central Bank raised the key rate. The last time this happened was in December 2023. Since then, the long-lived rate — 16% — has not changed. But it never fulfilled its main mission; inflation continues to grow, going off scale at an annual rate of 9%.
It can be said that the regulator's current decision is expected as the final and decisive battle in the fight against inflation. There is hope that after the board meeting, prices will slow down. But is it worth counting on? «MK» found out the opinion of Igor Nikolaev, chief researcher at the Institute of Economics of the Russian Academy of Sciences, on this matter.
— It is clear that the Central Bank will raise it. How long exactly? Forecasts on this matter vary widely, from 17 to 20%. Although, in my opinion, the chances that 20% will do so are slim. After all, 2.5 years ago, at the end of February 2022, we were moving away from this level. It is psychologically difficult to return to the same level from which you stubbornly left.
But the Central Bank firmly adheres to its position: if inflation accelerates, it is necessary to tighten monetary policy. But the tightening is no longer symbolic, but serious. I believe that the rate will be 18-19%.
— 70% — for 18% of the key rate and 30% — for 19%.
— I am convinced that the Central Bank is trying to reduce the population’s inflation expectations with the help of its forecasts. Even if you yourself understand that the “prediction” is not entirely correct. I think that the regulator will announce annual inflation at 7%. Or maybe he won’t dare to do this — he will publish a forecast of 5 to 6%.
— It is naive to expect that inflation will immediately begin to decline. If it has not decreased since December last year, then why should it go down now? Let me remind you that in December 2023, inflation was 7.4%. The key rate was then raised to 16%. And today inflation in annual terms is more than 9%. As we can see, a high rate does not work very well
— The economic policy of the state is carried out through a budget impulse, a large-scale saturation of the economy with money to stimulate the demand of the population. This is a factor that drives inflation.
And the monetary policy of the Central Bank, on the contrary, is aimed at reducing demand. The regulator's policies are unable to suppress demand, which is fueled by budget money. Fiscal policy wins this confrontation. The maximum that the key rate can do is to ensure that inflation does not accelerate even faster. But it is growing and will continue to grow, since there is a serious fundamental reason for the rise of inflation.
— It is unlikely that it will have any significant impact on reducing inflation. May frosts and summer drought in many regions of Russia do not inspire much hope for a reduction in prices for fruits and vegetables. In short, the forecast is not encouraging even with an increased key rate. The most optimistic is that inflation will be kept to 10% for the year, although this will not be easy.
— The increased rate makes the ruble more expensive, the Central Bank makes the national currency more expensive. Therefore, some strengthening of the national currency cannot be ruled out. But purely opportunistic. The fact is that market participants have already largely benefited from the strengthening of the ruble. Those who had long been convinced that the key rate would be raised, this was not denied by the Central Bank. There will be no big movements in the national currency.
— There are two news here: good and bad. The good thing is that rates on deposits in banks may rise, although they are still very high today. The bad news is loans; interest rates on them will also rise. Today, due to the budgetary impulse, our economy has “boosted”, enterprises are taking out loans even at high interest rates. But the dynamics, of course, are not what we would like to see. This problem, which should also be the focus of attention of the Central Bank.