Thursday, November 19, 2009

CBI will continue to cut rates

Financial Analyst FxPro Alexander Kuptsikevich: Next week, the 24 th of November, a meeting of the Board of Directors of CBI, which, very likely, for the ninth time it was decided to reduce the refinancing rate. Representatives of the Bank has also identified the reasons for such movement. Inflation lower than earlier projections, and perhaps, as predicted by Ignatiev, will be below 10 percent for the year.

In addition, in comments to an earlier meeting of the phrase sounded on the need to reduce the margin for short-term rates in the domestic and foreign markets. Currently the base rate for the U.S., Switzerland and Japan are near zero, while in the euro area - 1%. In Russia refinancing rate currently stands at 9.5%. Of course, the focus should be on the basis of the internal situation, but it allows for mitigation policies.
October results, the annual inflation rate amounted to 9,7%. It is believed that the Central Bank encourages lending, when the basic rate remains below the annual inflation rate. Anticipating a slowdown, and more (9-10% in 2010 and 5-7 in 2012), the central bank will continue to further reduce the rate. It is expected that the rate will be lowered by another 0.5 points to 9%.
Soft monetary policy contributes to a lower inflow of speculative capital into the financial markets, but also supports the real sector, while restraining the growth of the national currency, or contributing to its decline. Thursday Ulyukaev signified that the Bank adheres to the corridor in the 35 - 38 rubles for currency basket of dollars and euros. This morning, her course was near the lower boundary of the corridor. The authorities are prepared to prevent the further growth of our currency by using methods that are traditionally used, and other CB. At a time when other countries are thinking about tightening monetary policy or curtailing incentives, reducing the difference in interest rates in Russia and developed countries will reduce the amount of "hot" speculative capital in the economy.

On the currency basket influenced by two factors: demand for oil and fluctuations in the currency market. In the next month, oil demand will remain weak, that will not develop speculative pressures. Likely rate reduction refinancing on 24 November, and plans to reduce it further, would prevent such rapid growth, which was observed previously. But on the other hand, the euro does not want to grow. So at the end of the level of currency basket is likely to be 35,30-35,50, which is higher than the current marks. The dollar may cost about 29-29,50 pp. Accordingly, the euro may be less than 43 rubles, near 42,80.

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