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- Waiting for the key: the dynamics of the ruble exchange rate will be determined by the outcome of the Central Bank meeting
Waiting for the key: the dynamics of the ruble exchange rate will be determined by the outcome of the Central Bank meeting
Experts agree that a dollar will be worth no more than 80 rubles, even taking into account the reduction in the key rate. While the market is waiting for monetary easing in general, and the predictable decision of the Central Bank of July 25 will have little effect on the ruble exchange rate. The respondents interviewed by Izvestia talk about the impact of a possible reduction in the key rate on the national currency.
How much the dollar will cost: consensus forecast
The easing of monetary policy is in line with market expectations. Decisive steps are expected from the July 25 meeting of the Bank of Russia in the form of a reduction in the key rate by 1-2 percentage points at once.
Among the factors that the Bank of Russia can take into account when making a decision, experts identify expected inflation, domestic demand (consumer loans, retail trade turnover), external factors (sanctions, oil prices, foreign exchange flows) and the state of the federal budget. The federal budget is a deterrent for the Central Bank, as the risks of pro-inflationary financing of expenditures are currently high.
— It is necessary to reduce the rate primarily for a slight weakening of the ruble and to increase profitability from the sale of energy resources abroad. This means that it is necessary to replenish the treasury," says Ekaterina Kosareva, managing partner of the VMT Consult analytical agency.
In the event of a different decision — a sharp reduction in the rate by several percentage points at once, remaining at the current level, or, conversely, an increase due to high inflation expectations - the consequences for the ruble may be unpredictable, as well as the reaction of a market deceived in expectations.
However, among the analysts interviewed by Izvestia, there are those who expect the key rate to fall by 300 bps immediately, that is, immediately to 17%. But even in this case, the Central Bank's decision is unlikely to significantly affect the ruble exchange rate and other macro indicators (loan rates, etc.), says Grigory Zhirnov, an employee of the Laboratory of Macrostructural Modeling at the Faculty of Economics at the National Research University Higher School of Economics.
— The level of the real key interest rate and the real rigidity of monetary conditions will remain very high. To revive lending, the rate should decrease to at least 13-15%. But this can be expected only towards the end of the year," the expert explained.
According to calculations by Alfa-Forex analysts, in August the trading corridor for the ruble/dollar currency pair will be 77.75–84 rubles, and for the euro/dollar pair — 89-97 rubles.
The main effects of the key rate cut
The reaction of the financial market will depend on the step of lowering the key rate, the respondents of Izvestia agree.
So, according to Ekaterina Kosareva, if the Central Bank makes a cautious decision to reduce the rate by 1 percentage point, to 19%, this is unlikely to cause a noticeable reaction, since such a decision is already included in the baseline scenario.
Vladimir Lyubetsky, associate professor of the Department of National Economics at the Presidential Academy, says that the factor of the high ruble exchange rate and the growing problems in certain sectors of the economy is in favor of lowering the rate.
These are primarily construction, the coal industry and the car dealership industry. In addition, the regulator is experiencing some pressure from the business community due to emerging signs of a cooling economy, the economist added.
— At the same time, there are still quite powerful factors that support a high rate. Firstly, inflation expectations are still high, although they dropped to 13% in June. Secondly, the deterioration of the terms of foreign trade, the surplus of which decreased by 19% in January-May and continues to trend against the background of cheaper oil," he says.
What will happen to deposits and loans in 2025
A reduction in the key interest rate, especially a radical one, will certainly revive the lending market, Vladimir Lyubetsky is sure.
— Banks have already started to reduce deposit rates. This means that cheaper loans are just around the corner. The rate cut will support the construction industry, which has been experiencing some difficulties lately. But this will not significantly change the situation. The bid is still high. And mortgages are largely developing due to government support," he says.
By adjusting the rates in advance, banks reduce the cost of funding, adds Yulia Makarenko, Deputy Director of the Banking Institute for Development.
— This means that credit institutions are measuring the risks and losses due to more expensive money right now relative to cheaper money later, and this applies to deposits (minimizing the damage from having to repay money with excessive future returns) and loans (eliminating the "injustice" for customers who borrow now).. Hence the precautionary correction," Yulia Makarenko said.
The surveyed analysts note a trend towards lower rates on both deposits and loans.
Spartak Sobolev, Head of the Alfa-Forex Investment Strategy Research Department, noted that the easing of monetary conditions by the Bank of Russia gives a signal to lower rates in the mortgage market.
— However, the market is likely to remain stagnant for the time being due to the harsh conditions, - said the expert.
Ilya Ivaninsky, head of the Center for Business Education and Analytics at Central University, expert partner at Yakov and Partners, agrees with him.
— The decision of the financial regulator to reduce the key rate by 1-2 percentage points will not have an immediate impact on the value of real estate. At the same time, we can expect real estate prices to rise in the medium and long term, when interest rates will fall even more and investing money in deposits will become less attractive. And then the cost of housing may start to rise under the influence of low interest rates, more affordable mortgages and investment attractiveness," he concluded.
According to Anna Zemlyanova, chief analyst at Sovcombank, a more significant reduction in the key interest rate to 10-12% is needed to actively restore the market segment.
— According to our estimates, the key rate may fall to 14% by the end of 2025. By the same time, prices in the primary market, where the family mortgage remains the engine of the market, may increase by 7%, and prices for ready—made housing may decrease slightly, the expert predicts.
Not just the ruble
There are always two participants in any currency pair, and often the strengthening of one currency is motivated mostly by the weakening of the other, Ekaterina Kosareva reminds.
— In addition to internal and even foreign policy factors such as the escalation or defusing of the situation in the Middle East, trade wars will play a key role in the positions of the US dollar in the coming weeks, which will finally enter an active phase. If the transition from threats to actions happens, we predict a weakening of the US currency as trade duties reverse and trade turnover decreases in general against the background of shock and global restructuring of commodity and investment flows," the analyst argues.
According to her, when deciding on the key rate, the Bank of Russia will consider this factor as well.
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