The Bank of Russia in 2020 could increase the key rate to 7-7,5% from the current 6% due to accelerating inflation and rising inflation expectations amid the weakening of the ruble due to the decrease in oil prices, from moderately negative scenario presented in the review of the analytical Agency “Expert RA”. About it writes “Interfax”.
The scenario assumes a decrease in average prices of Brent crude to $40-45 per barrel. “The weakening of the national currency against the background of weak oil prices will accelerate inflation and exceed the target set by the Bank of Russia to 4%. As a result, the key rate may be raised by 1-1. 5 percentage points to the end of 2020, and the rate of growth of the Russian economy will slow to near-zero values”, — stated in the review.
In this scenario, inflation in 2020 will amount to 4-5%.
The Agency believes this forecast is the most likely, but adds that the next two months will be decisive for selecting the scenario vector.
The crisis scenario analysts “Expert RA” provides decrease in average oil prices to below $35 per barrel. In this case, the Central Bank will continue to take measures to maintain the exchange rate until the end of April, and then will weaken or stop selling currency in the market due to the fact that it would be economically disadvantageous.
“At the end of April the market will be able to assess the reduction in demand for oil, depending on the deceleration of global economic activity against the background of the fight against the virus, and the impact from the increase from 1 April in production. In the absence of new arrangements for the resumption of the transaction of OPEC+ oil prices are waiting for another period of decline, as a result, the maintenance of the ruble in the current price range will be unprofitable for the Bank of Russia, as it will rapidly Deplete reserves. The rejection of foreign exchange intervention against the background of weak oil prices will lead to a significant depreciation of the national currency and activates the conditions for the onset of a crisis scenario,” says the review.
Russia’s GDP, according to this scenario, in 2020 will decline by 1.5%, inflation will exceed 7% and the key rate will be more than 9%.
The Agency expects further expansion of measures to limit the spread of coronavirus infection and the imbalance of supply and demand in the oil market. The cancellation of the transaction by OPEC+ is an aggravating stress factor for the stability of the global financial system, analysts say.
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