Summary:
- Central Bank of Russia has cut the rates to promote lending activity
- Bank deposits are still high leading to potential liquidity problem
From... United Bank of Switzerland Daily News Report:
Headline: CBR Introduces More Rate cuts
- CBR Lowered its major policy rates
- Main reason for change was weakening inflation and completion of the correction period on the currency market
- CBR Goal: To promote lending activity – fully expected
- If inflation proceed to fall, CBR will probably continue cutting rates , which experts say are too high
From... Business New Europe Daily News Letter:
Headline: CBR Cuts Refinancing Rate to 11%, Expects Lending to Recover
- Refinancing rate dropped by 50 pts to 11%
- Ruble reacted by falling 3%
- Cut expected by the markets, authorities are certain that inflation will continue to decline at least until the end of summer
- Cut will not have a rapid and direct effect on lending rates.
- Nonperforming Loans are still an obstacle to lending recover
- Weak economic indicators might create deflationary pressure
- Decline in oil prices could also be prompting a new round of foreign-currency buying
- If prices keep falling, the ruble will continue to drop
Headline: Budget Deficit Reaches 8.8% in June
- Federal budget deficit amounted to R277B, 8% of GDP in June 09
- Revenues increased due to increase in oil and gas revenues and increase in prices
- Expenditures increased due to increase government support for the financial crisis
- Budget is expected to exceed 11% GDP due to increase in budget expenditures
- Further anti-crisis expenditures expected
- Reserve fund will be the main source of financing
Headline: Reserve Fund Declines $6.4B USD in June
- The Reserve Fund amounted to $94.9B – a decline from $101B in June
- Due to an oil and gas transfer
- Budget situation will become more problematic in 2H09
- Although oil and gas revenues will stabilize, non-oil revenues will decline and expenditures will increase
- Will lead to a higher budget deficit
Headline: Bank Deposits with CBR Rose Another 25% in June
- The growth of the monetary base accelerated to 5.4% MoM from 5.1% in May
- The breakdown of the base suggests that lending is still not recovering – banks are continuing to accumulate a liquidity overhang
- Main contributor to growth was commercial banks' deposits with CBR
- Deposit growth rates suggest that the lending environment is still poor
- Banks are still unable to transfer state support to the real economy
- Liquidity overhang is a potential threat to the exchange rate market
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