Financial Market Creates Conditions to Reduce Deposit and Loan Rates

4 september 2019 | Rossiyskaya Gazeta

"A stable reduction in the rates on the market of public debt instruments is now creating conditions for lowering deposit and loan rates," Daniil Nametkin, Deputy Head of the Department for Expert Analytics of the Analytical Center, made a statement to Rossiyskaya Gazeta.

Daniil Nametkin
Daniil Nametkin
Department for Expert Analytics

According to the periodical it is forecasted that the Board of Directors of the Bank of Russia will reduce the key rate from 7.25 to 7% this Friday. "On September 2, the rate of 10-year federal loan bonds dropped to 7.05%, its minimum since April 2018," the expert explained.

There are all arguments for a further cautious reduction in the rate, Rossiyskaya Gazeta notes. Inflation slows down faster than the forecast, and, considering a good harvest, following the results of the year it may even be lower than the target of 4%; inflation expectations of the population decreased to the values of the beginning of the year, the economy grows poorly, and the threat of new sanctions looks blurred so far. Finally, according to the periodical, all central banks led by the US Federal Reserve reduce base rates, and the Central Bank of Russia just can not stay on the sidelines.

However, in the opinion of Nametkin, the Central Bank may be constrained by the risks of a slowdown in the global economy due to the trade war between the United States and China, that have introduced additional counter duties since September. "This can lead to an increased volatility in the global commodity and financial markets and affect exchange rate and inflation expectations," the expert thinks.

Source: Rossiyskaya Gazeta