CBR Interest Rate Cuts Cycle Completed
OREANDA-NEWS. July 02, 2010. CBR board decided not to change its policy rates, leaving the refinancing rate at 7.75%, and indicating a halt in cutting interest rates, reported the press-centre of OTKRITIE Financial Corporation.
View: We believe that markets were not expecting further rate cuts. First, inflation risks are increasing and in May disinflation was halted due to a number of factors: M2 growing at 31% YoY pace, and ruble appreciation will no longer be supportive of disinflation.
Second, economic growth prospects now appear to be much brighter on the back of Rosstat’s revision of industrial figures (based on 2008 industrial structure) and a change in expected GDP figures for previous quarters.
Third, we no longer see a decrease in banks' lending portfolios, which are now demonstrating some growth, albeit fragile and slow. Hence we treat the news as neutral and expect rates to remain stable for the next several months.