On September 13, the Bank of Russia will decide on the size of the key interest rate, which is currently at 18%. RB.RU interviewed 11 analysts who shared their forecasts on whether this indicator will grow or remain the same and explained how the Central Bank’s decision could affect small and medium-sized businesses (SMEs).
Author:
https://rb.ru/author/strukova/
Subscribe to RB.RU on Telegram
RB.RU’s consensus forecast for the key interest rate is 18.5%.
RB.RU has compiled forecasts from analysts and experts regarding the decision of the Governing Board of the Central Bank of the Russian Federation on the key exchange rate on September 13.
- VTB – 19%
- SberCIB Investment Research: 18%
- PSB – 18%
- BCS World of Investments – 18%
- SDM Bank – 19%
- “Development Center” of the Higher School of Economics of the National Research University – 18%
- “SOLID Corridor” – 19%
- “Russian standard” – 20%
- IC “Finam” – 18%
- “RSHB Asset Management” – 18%
- Alfa Bank – 18%
Why the key rate may remain at 18%
“In my opinion, the limit for raising the key interest rate in a painless way for the economy has been exhausted. The current key interest rate is at its maximum level and conditions will be created for a slow and gradual easing of monetary policy (MP) by the end of the first quarter of 2025,” RB.RU said. Denis Popov, chief analyst at PSB.
Igor Safonov, Senior Expert of the Development Center of the Higher School of Economics of the National Research UniversityHe believes that some signs of a slowdown in economic activity have already begun to appear and the Bank of Russia will most likely pause to assess stability.
“An important factor for raising the key rate may be the higher trajectory of state budget expenditures for 2025-2027, however, until the State Duma approves the final draft budget and the final parameters are assessed, this is unlikely to serve as a reason for a preemptive increase,” Safonov said.
As stated Ilya Fedorov, Chief Economist at BCS World of InvestmentsThe arguments in favour of maintaining the interest rate will weigh more than other scenarios at the next meeting.
“In the current situation, the Central Bank is choosing between the speed of achieving the target and the stability and sustainability of the process of achieving the target and maintaining inflation,” says economist Ilya Fedorov.
The scenario of a further increase carries many risks. In particular, there is the risk of crushing the economy and then initiating a rapid rate cut if something suddenly fails in the financial system and the ensuing economic slowdown turns into a recession, according to an expert at BCS World of Investments.
Why the Central Bank may raise the key rate to 19-20%
Rodion Latypov, chief economist of VTB Group I am sure that the rate will rise and already in September the Central Bank of the Russian Federation will choose between 19% or even 20%. This decision will be influenced by inflation and the dynamics of lending above the forecasts of the Central Bank of the Russian Federation, as well as by rising inflation expectations, especially among retail companies. The dynamics of GDP also stood at the upper limit of the forecasts of the Central Bank of the Russian Federation.
“All this means that the key rate should be at the upper limit or above the range forecast by the Central Bank. Recall that the Bank of Russia’s July forecast for the average interest rate until the end of the year was 18-19.4%, which does not contradict its increase to 20% already in September,” Latypov believes.
SDM-Bank says rate will rise in September.
“Based on the latest comments by the spokesmen of the Bank of Russia, the regulator seriously fears that the situation in the economy will follow an inflationary scenario against the background of high government spending, overheating of the labor market and difficulties on the supply side of goods and services. Therefore, the Central Bank is using all possible means to achieve success in the fight against inflation, which threatens to get out of control,” it says. Deputy Chairman of the Board of Directors, Head of Treasury of SDM-Bank Eduard Lushin.
Even if the key interest rate is not raised on September 13, this could happen in October, according to experts at SberCIB Investment Research.
Senior Analyst at SberCIB Investment Research Igor Rapokhin It said it expects the rate to rise to 20% in October if strong credit dynamics and high inflation expectations continue.
“The rate hike in October, together with the tightening of macroprudential regulation by the Central Bank and adjustments to preferential mortgage programs, will help to curb inflation next year to 4.5%,” believes the expert.
How the key rate level will affect small and medium-sized businesses
- The impact of the key rate on SMEs will be multifaceted, according to experts interviewed by RB.RU.
“Much will depend on the duration of the period of high rates, the effectiveness of government support measures and the ability of companies themselves to adapt to new conditions. It should also be borne in mind that most SMEs traditionally develop on their own funds,” Vyacheslav Mishchenko, an expert at the Presidential Academy, a visiting professor at Torcuato di Tella University and author of the Telegram channels “Fintech for All” and Investments. Insights, told RB.RU.
Following a rate increase, entrepreneurs may prefer to place free funds in deposits rather than investing them in business development, as deposit rates will rise. The expert adds that in conditions of high interest rates, the state can strengthen SME support programmes, including by subsidizing interest rates on loans.
- If rates rise, business could be negatively affected by weaker sales, experts add.
According to PSB’s Popov, there are increasing signs in the sector of a decline in corporate demand for financing and a weakening of commercial activity.
“The widespread reduction of preferential lending programmes, as well as the tightening of macroprudential rules with the achieved monetary policy rigidity, will soon guarantee a rather noticeable slowdown in economic dynamics. The most vulnerable in these conditions may be industries focused on external economic activity, where the situation is aggravated by the problem of cross-border payments, as well as related sectors,” the expert says.
Igor Safonov from the Institute for Economic Research of the Higher School believes that even despite maintaining the key interest rate, monetary conditions for market programs will continue to tighten, including for loans in the SME segment, which will limit their business activity. The still strong consumer demand may be a mitigating factor, but the expert expects it to gradually cool down within the next one or two quarters.
According to Maxim Pleshkov, chief bond analyst at Solid BrokerThe upcoming rate increase will not affect SMEs much, as only those who pass on the borrowing costs to the buyer can afford to get a loan under current conditions. For many working in highly competitive sectors, the current rate level is prohibitive and they have refused to develop their business using borrowed money.
Director of Strategy at Finam Investment Company Yaroslav Kabakov He added that small and medium-sized businesses are particularly sensitive to changes in interest rates, and their investment and expansion opportunities will be further limited if the Central Bank of the Russian Federation’s interest rates rise.
“With higher interest rates, banks can tighten requirements for borrowers and increase the percentage of loan rejections. Those companies that are able to obtain financing will have to face higher debt service costs, which will reduce their profits,” Kabakov said.
At the same time, Mishchenko is sure that high rates can push companies to look for internal reserves and optimize business processes, and small and medium-sized businesses will begin to more actively look for alternatives to bank loans, such as crowdlending or attracting direct investment.
Author:
Ekaterina Strukova
Source: RB
I am a professional journalist and content creator with extensive experience writing for news websites. I currently work as an author at Gadget Onus, where I specialize in covering hot news topics. My written pieces have been published on some of the biggest media outlets around the world, including The Guardian and BBC News.
