Russian CB says lending rate cut in sight but warns against haste

By bne IntelliNews November 16, 2015

Russia's key lending rate may be cut at one of the next three rate meetings, Central Bank of Russia (CBR) governor Elvira Nabiullina says, while warning of the risks of easing monetary policy too quickly.

"It is important for us to conduct such a policy that would finally lead to reduction of interest rates on all loans," TASS news agency quoted Nabiullina as saying on November 13. "We should not only expand financing with regard to reduced rates set for certain borrowers which only slows down and narrows opportunities for reduction of rates on all credits."

The CBR chief also said restricting access to foreign borrowing market for Russian banks is leading to a reduction of currency funds by $200bn annually. "The decline of oil prices together with restriction of the access of Russian banks to foreign borrowings leads to reduction of currency funds. According to our estimate, the flow of funds decreases by about $200bn in annual terms," Nabiullina said.

Alfa bank analysts took the governor's words on the rate to be an effort to "smooth the central bank's extremely dovish statement published on October 31, which read like a definitive guidance for a rate cut at the next policy meeting", which is scheduled for December 11.

"From the start, that looked to us as though it would be a controversial course of action, with Fed policy rate decision expected on December 16," Alfa chief analyst Natalia Orlova wrote in a note to clients. "As the recently published strong payroll statistics in the US increased the likelihood of a Fed rate hike, the external environment works against CBR action."

Internal data also cautions against a rate cut, Orlova noted: GDP contraction in the third quarter was only 4.1% y/y, better than expected, while inflation figures might surprise negatively in coming weeks because of the introduction of a freight truck levy, expected to come effective November 15.

"We share the CBR view, expressed by Ms. Nabiullina, that a cut that might have to be reversed in the near future is not a viable policy option," Orlova wrote. "Precisely for this reason, we maintain our view that the CBR policy rate will remain unchanged on December 11. We believe that a window of opportunity for a cut is unlikely to emerge before 1Q16."

Regarding inflation levels, Nabiullina said the rise in consumer prices in Russia this year will be at 12-13% but will start to decelerate sharply because of the base effect. At the start of 2016, the CBR expects a significant reduction in annual inflation, decreasing to 5.5-6.5%.

"According to our forecast, inflation will continue to decline quite rapidly in the next year, moderately tight monetary policy, restrained and low demand will contribute to it," the governor said.

Related Articles

Kazakh Kazkommertsbank confirms talks on deal with Halyk Bank

Kazakhstan’s largest bank Kazkommertsbank (KKB), recently rebranded as Qazkom, has entered preliminary negotiations for an unspecified “deal” with Halyk Bank, KKB said in ... more

Slovenian government approves privatisation plan for 2017

Slovenia’s government approved Slovenian Sovereign Holding’s (SSH) 2017 privatisation plan on January 19. The plan includes the sales of two 100% state owned banks, Slovenia’s largest lender ... more

Blow for Russian stocks as Kremlin backs away from higher dividend payouts

Russian stocks are facing a serious setback after it emerged that the Kremlin may be backing out of a decree to force state-owned companies to pay dividends worth 50% of their earnings. The ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss