A maximum of 100 pts please…

Today at 2.00pm, CBRT will announce its rate decision. Unrealistic expectations aside, I, as the voice of reason, say that the CBRT should cut rates by a maximum of 100 points.

As only a few hours left to hear the rate decision, a huge amount of economic data from last week to today don’t stop coming in.

Having followed a sharp ascending trend in September, then showed a lesser performance than expected in October, and finally continued to rise in November, though not anticipated, as announced yesterday, the industrial production data gave us an idea about 2019 GDP growth. I can already say that growth rate will turn out to be somewhere between 0.4% and 0.8%.

Meanwhile, we can observe a positive trend both in gross profit index and retail sales volume in November. Although there are no expectations for single digit in inflation rates yet, I can guess that CBRT will cut rates by a maximum of 100 pts on Thursday. Besides, a cut higher than 100 points would damage economic confidence.

“These are not the normal times…”

I give conference talks all around the world. In every country I visit as a guest speaker, I tend to give Central Banks the following message: “Cut the rates as much as you while you still have the chance!” Well, the keyword here is obviously “the chance”. As a matter of fact, CBRT Management was very successful in using the chances they got as effectively as they could last year. The circumstances this year sadly don’t offer too many opportunities for sharp rate cuts. On the contrary, the circumstances render the utmost attention necessary.

I must also indicate that I haven’t noticed drastic changes in private banks’ deposit-credit interest rates over the course of the last month. I do not think that any institution will dare to take a radical step without seeing single digit inflation one way or the other.

I personally don’t expect a surprise decision. A cut higher than 100 points, however, would be quite shocking for the markets.