Vasily Yakimkin, a docent of the RANEPA subdepartment of stock markets and financial engineering, commenting on the drop of the key rate in Russia by 1% to 14%, said that the Central Bank had been raising the rate to 17% under pressure, hitting the real sector. He noted that inflation had been lowered to 15% one and a half months ago.
Yakimkin warned that individuals will suffer deposit cuts of at least 1-2%, while the loan rate would not fall. He believes that beneficial mortgages for people buying housing on the primary market will be available in March, large banks may offer them at a rate of 13%. The expert clarified that it was useless for business to get loans at a rate of 25% when their income was 10%. In his words, annual loans should have a rate of 4-5%, the Central Bank's rate should be 2-3% in that case.
Yakimkin draws a parallel between the fall of the key rate and inflation and oil prices. He predicts that the rate may further drop by 0.5-1% in the next 40 days.
Andrey Abramov, a senior scientist at the RANEPA Presidential Institute of Applied Economic Studies, said that the rate had no radical economic effects, the difference between 15% and 14% was not that big. In his opinion, the key rate may be lowered again on April 30.
According to the Central Bank, the decision to lower the key rate to 14% will reduce economic risks without provoking higher inflation. Lower risks would encourage further reduction of the key rate, specialists of the bank say.
