Analyst Osadchy told how Russians can make money from this
The Central Bank of the Russian Federation may raise the key rate on June 7. Deputy Chairman of the Bank of Russia Alexey Zabotkin stated this last week. Regulator documents contain similar statements. Thus, the “What Trends Are Saying” bulletin published in May emphasized that if the current rate of price growth does not begin to decline again, further tightening of monetary conditions may be required. Inflation in Russia, meanwhile, has already exceeded 8%. What will happen to the key rate, why it is impossible to curb the rise in prices and how Russians should act in this regard, Maxim Osadchiy, head of the analytical department of BKF Bank, told MK.
Photo: ru.freepik.com
— At the last meeting, two options were considered: maintaining the rate at 16% and increasing it to 17%. At the next meeting, the same dilemma will apparently be considered. And it is possible that this time the choice will be made in favor of a promotion. The main reason is that inflation is not letting up and by the end of May had already reached the annual level of 8.15%. Moreover, the rise in inflation occurs against the backdrop of a strengthening ruble. This contributes to a reduction in prices, primarily for imports, but this effect, as we see, is not able to reverse the trend of rising inflation. Throughout May, stock prices for gasoline are actively growing, and the increase in fuel costs is translated into rising prices for other goods.
— Of course, there are more than enough factors for rising prices in Russia. Thus, the increase in housing and communal services tariffs from July 1, 2024 will add fuel to the fire. In the pre-election year of 2023, tariffs did not change, so the next indexation will make up for a year and a half of forced abstinence. Among the reasons for the current inflation is the labor shortage, which entails rising wages. Not everyone, of course. The main beneficiaries are IT workers, manufacturing workers and construction workers.
Another important factor is sanctions, which contribute to rising import prices. The process is also spurred by the growth of consumer lending, which occurs despite high interest rates. The annual growth in consumer credit as of May 1 was 17.8% versus 8% a year ago. The growth of consumer lending contributes to the growth of demand and thereby contributes to the acceleration of inflation.
— This effect is much weaker than the main effect — high rates promote an increase in savings: people spend less and save more. As of May 1, individuals' funds for the year increased by 24.8% against 11.8% a year ago.
— It is difficult to make forecasts now. Despite the fact that there are only a few days left before the meeting of the board of directors of the Central Bank of the Russian Federation, there is still no consensus on the rate. Although most financial market participants still expect the indicator to remain at 16%.
— A high key rate “cures” inflation, regardless of what factors it is caused by. It helps to sterilize liquidity (the so-called withdrawal of a certain part of money from the economy through special instruments, for example, attracting deposits from the regulator — “MK”), increasing the attractiveness of deposits and, thereby, eliminating the monetary overhang that puts pressure on prices. Less money in the pockets of the population means less demand for goods, and accordingly, their prices stop growing.
— Although inflation in Russia is growing, it is growing very slowly. If you “go too far” and raise the key rate, say, to the Turkish 50%, it will have a powerful negative impact on the economy — it’s like pulling the emergency brake at full speed. As a result of such a shock, a debt crisis may begin: businesses will not be able to cope with the increased burden of servicing loans. If you soften monetary policy too much, “take pity” on the economy and reduce the key rate, then as a result of such “shortfall”, inflation will accelerate, which will lead, among other things, to social destabilization. The fact that inflation is “almost” stable indicates that the regulator has found a value close to the optimal one. And all that remains is to adjust the rate in small steps, taking into account the emergence of new factors.
— First of all, because this is a “tax on the poor”. For wealthy people, a sharp increase in the price of some product will lead to its substitution. The price of black caviar has become prohibitive — they switched to red. But for the poor, even a slight increase in the price of some product from their diet can be critical — there will be nothing to replace it with. Unless they switch to expired goods that stores throw out. Therefore, high inflation can lead to increased social instability.
— First of all, bank depositors will benefit from the increase in rates. But loans, first of all, commercial mortgages, will become even less accessible. Let me remind you that from July 1, the authorities plan to cancel preferential mortgages, so there is little time left for those wishing to take advantage of these benefits to «jump on the last train.»