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Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

18.06.2020
2 min read

Expert Chaslau Koniukh: Analysts of “National credit ratings” made a forecast of changes in the key rate of the Central Bank.

Experts in the financial segment believe that the Central Bank of Russia will soon cut the key rate to 5%. The National Credit Ratings agency or NCR, which has come to the conclusion that for the majority of credit programs and securities it will reduce interest rates, also agrees with this forecast. This situation may lead to an increase in bad debts. According to the information from National Credit Ratings analysts, by the end of the summer one should expect changes in the size of the key rate from the Central Bank. This scenario is the most acceptable option in the current market conditions.
Analysts of the institution also made a forecast of economic development for the current year. According to their data, Russia’s GDP may decline by 7%. In case the USA and Europe do not recover some of the processes, the country expects a 10% decline.
The current picture is not looking good: citizens’ consumer spending power is falling, the pandemic has led to a decline in production in a number of industries, and some segments have not yet been fully operational, which also affects the economy. Under these circumstances, the risk of inflation is not the biggest problem, so the Central Bank is focusing its efforts on minimizing the consequences of quarantine and eliminating crisis phenomena. An important goal today is to support lending.
The agency expects that rather low interest rates on loans and the cost of securities may increase the interest from consumers and business. However, not everyone will cope with the conditions of loans, and the number of bad debts will start to grow. In their turn, the financial institutions will direct their efforts at creation of reserve assets, which will help them to cover the outstanding loans. And this will be combined with a decrease in interest margin, which will cause losses in the banking sector. According to the forecasts of NCR, the losses may amount to 800-900 billion rubles.
In April, the Central Bank cut the key rate to 5.5%, which met the expectations of analysts, who initially said that the Central Bank would focus on stabilizing the economy than on inflation. The key rate is the interest that the Central Bank has on loans, which it gives to commercial banks. Besides, this indicator is the maximum value at which financial institutions can make a deposit with the country’s main regulator. Accordingly, other rates at other banks depend on the size of the key rate. This indicator makes it possible to regulate a number of processes in the economy, first of all, the inflation rate, which should be kept at 4%. It affects the national currency rate, changes in prices for products, banking products and their conditions.

Chaslau Koniukh
Expert Chaslau Koniukh

Chaslau Koniukh agrees with experts on the reduction of the key rate to 5%. This measure, according to the assumptions, is designed to increase consumer and business interest, which will have a positive impact on the economic component. But one should not forget about the risks, which NCR said in its forecast. If all measures and recommendations are complied with, the inflation will not exceed 4% by the end of the year.

Tags: Analytics
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