Is Another Interest Rate Hike Coming in September? Expert Analysis Reveals Surprising Findings
By Gleb Bryanski
In a surprising turn of events, a senior central bank official has hinted that another key interest rate hike in September is not a certainty. This comes as economic growth and lending are showing signs of slowing down, marking the most dovish comments from the regulator since the July rate hike.
In July, the regulator raised its benchmark rate by 200 basis points to 18%, the highest level in over two years, citing economic overheating and high inflation rates as the main reasons. The central bank's board is set to meet next on Sept. 13.
"The board will assess the feasibility of an additional key rate increase at upcoming meetings. This means that an increase at the next meeting is not predetermined, it will depend on the incoming data," Deputy Governor Alexei Zabotkin revealed during a news conference.
While consumer and corporate lending have shown signs of slowing down in August, preliminary inflation data has not shown any signs of price growth moderating, according to Zabotkin.
The central bank also released a draft of its monetary policy guidelines for the next three years, stating that a tight monetary policy will need to be maintained for a prolonged period to achieve a sustainable decrease in inflation, which is currently over 9%.
In a high-risk scenario outlined in the guidelines, the regulator predicts inflation rising to 13% to 15% by 2025. However, in the base scenario, inflation is expected to fall to 4.0% to 4.5% by 2025 as a result of the central bank's measures, after which it will remain near the 4% target level.
The release of the guidelines follows a strong set of economic data published recently, showing solid growth in many sectors and high investment rates, hinting at a brighter outlook for the year despite Western sanctions.
Furthermore, the central bank predicted a decrease in imports in 2024 due to issues with cross-border payments and logistical challenges linked to Western sanctions. Russian companies have been experiencing delays in transactions with China, as Chinese banks have become more cautious in response to threats of secondary sanctions for dealing with Russia.
While the central bank anticipates a decrease in imports in the short term, it remains optimistic that the situation will improve in the medium term.
Analysis:
In conclusion, the central bank's cautious approach to another interest rate hike reflects the delicate balance between controlling inflation and supporting economic growth. The potential impact of these decisions on lending, inflation, and imports could have far-reaching consequences for the Russian economy and international trade. As investors and consumers, it is crucial to stay informed about these developments and their implications for financial planning and decision-making.