In the first half of 2015 to stabilize the ruble and oil prices allowed the Russian Central Bank (RZB) to start loosening monetary policy by lowering interest rates. At one point even the bank started buying currency to limit excessive appreciation of the ruble. The renewed depreciation of the Russian currency and oil, however, lead to uncertainty about the future policy of RZB.

Policy change

RZB last week lowered its key interest rate for the fifth time since the beginning of the year to 11%. The Bank has changed his rhetoric, which led to uncertainty about its future actions, writes Bloomberg. In a recent statement RZB missing phrase that the institution is ready to continue lowering interest rates, which are accepted by the market as a signal of potential change in strategy.

“For the first time in months, it is unclear what the next move of the bank. RBC does not want to promise clear steps in the market,” said Dmitry Polevoy, chief economist at the Moscow branch of ING Bank Eurasia. Change the message on the bank’s strong decline in the ruble last week. Depreciation erased almost all gains of the currency this year and surpassed the rate of 60 rubles to the dollar for the first time from May. On Tuesday, one dollar was worth about 63 rubles.

Interest rate dilemma

“Management of RZB has not committed to a further reduction in interest rates. Future decisions on this issue will probably depend on the movements of the currency,” says Lisa Emolenko, an analyst at Capital Economics. “On one hand, the recession in the economy and very tight credit are an argument for even greater reduction of interest. But on the other hand, loosening of monetary policy in a time when this could lead to an even stronger decline of the ruble, creating risks of inflation and financial instability, “says she.

Experts from Renaissance Capital expect at the next meeting in September the central bank to leave interest rates unchanged. Analysts from Goldman Sachs Group in turn predict that the decline will continue and interest rates will be reduced by a further 4% in the first quarter of 2016 Alfa Bank argues that a further decline in oil prices and appreciation of the dollar may lead to preserve the current interest rates until the end of 2015

Analysts surveyed by Bloomberg, the statistics will show a rise in inflation in Russia to 15.8% yoy in July. According to the forecast of the International Monetary Fund, inflation will drop to 12.5% ​​by the end of this year and to 7.8% by the end of next year.