The onset of the coronavirus epidemic, the change of the Russian government and more spending on social measures backed by Vladimir Putin. The Central Bank will have to decide what to do with the rate before the impact of such risks becomes clear, Vedomosti wrote.
The majority of experts, interviewed by the newspaper nevertheless expect the regulator to decide for the sixth consecutive reduction of the key rate, which is the rate by which commercial banks borrow money from the central bank.
Consumer prices have not responded to the easing of monetary policy since June 2019, VTB Capital analysts noted. Against this background, the Central Bank may again reduce the rate. Analysts interviewed by Reuters expect this as well – 15 out of 24 economists expect a rate cut of 0.25 percentage points to 6%.
On the other hand, external risks can prevent a rate cut. Due to the outbreak of the novel coronavirus, the price of Brent oil could drop by $11 in 2020, Citi analysts believe. Oil prices have already fallen by 12% since the end of December and by 4% last week. The ruble exchange rate for January also fell by 2.5%, Alfa-Bank analysts said.
A couple of weeks ago, the ruble was actively strengthening. This was one of the factors in favor of lowering the rate, chief economist at Nordea Bank Tatiana Evdokimova said, but against the backdrop of the epidemic, the ruble’s future is beginning to look bleaker.
The virus has already caused a panic throughout global markets, the Bank of Russia will not be able to ignore it and will take a break from changing the key rate, at least until the peak of the epidemic or the stock markets stabilize, analysts at Veles Capital predict.
In the future, the regulator may reduce the rate one more time – in April to 5.75%, Rosbank chief analyst Evgeny Koshelev believes, and then they’ll wait and see until the end of the year.