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The rate will probably be 23%. The Central Bank continues to tighten the strings, but what do I do?
Interest rates are likely to be 23%. Central banks continue to beckon, so what do I do?
The Bank of Russia recently published the results of its base interest rate discussion on Friday the 13th, raising the base interest rate to 19%. The central bank has acknowledged that interest rates will continue to rise at its upcoming meeting in October. And some authoritative financiers are convinced that 20% is far from the limit.
🔮Let's take a quick look at what's coming up for the rest of the year. We'll also tell you what steps we're taking to save you the money you earn.
During the discussion, the following arguments were put forward in favor of increasing CS:
1️⃣The slowdown in economic activity in recent months is probably not due to a decline in demand, but to a worsening situation on the labor market and the depletion of business potential (i.e. there is nowhere else to accelerate).
2️⃣Inflation data for July and August suggest that the year-end target will not be met. Disinflation needs to be stimulated.
3️⃣Inflationary expectations of the population and business are growing, which also provokes inflation and it needs to be cooled somehow.
⚠️Important note: the speed of lending is influenced by numerous non-market factors (e.g. government incentives). Therefore, regulators can only cool the market further.
📈What will be the base interest rate at the end of 2024?
For the same reason, the central bank may again raise the base interest rate to 20% in October 2024. The head of the Central Bank, Elvira Nabiullina, has already spoken about this.
Much will depend on consumer demand and inflation in September and October. Although demand appears to have slowed in recent months, deflation has not materialized. The central bank cited a decline in supply rates as one reason. People are buying hard, but new goods are not being added in sufficient quantities to keep prices from falling.
🏛️The central bank expects higher interest rates to have an effect, but expects it will take several months for demand to grow at a more moderate pace than supply.
😲At the same time, we believe that VTB Bank risks growing by 23% next year. “If the inflation rate approaches 8% next year, the base interest rate could be raised to 23%,” he told reporters. VTB Chairman of the Management Board and Chief Financial Officer Dmitry Pianov.
We understand that some investors have completely switched from stocks to deposits and bonds. They argue that at the current rate, the economy and inflation will inevitably experience a strong cooling. This means that instruments with good fixed income can bring much more than risky assets.
🍁I agree with this, but only partially. The economy is actually slowing down. It has already started, and by the end of this fall, the level of economic activity will decrease along with the drop in outside temperatures. Many companies' reporting for the second half of 2024 will be worse than for the first six months.
For the first time in my memory, the economy has a situation where base interest rates and deposit rates were 2-2.5 times higher than official inflation and more or less in line with real prices. Given that we do not expect the inflationary spiral to accelerate in the next six months or a year, now is a great opportunity to lock in high pegs. You can ensure profitability for some time to come.
● I open a savings account with an interest rate of 19-21% per annum.
● I buy OFZ-PD for the medium and long term with a yield to maturity of 16-18%.
● I accept corporate bonds with a yield of 20-25%.
💸What else to do with them?
By the way, my original meme about the hamster, which recently closed the audition season :)
But there are some doubts about inflation at 4% in a year or two. The budget for 2025 is set with a significant deficit, which is likely to continue to increase. Payments to participants in the SVO and workers engaged in the production of defense products are increasing. At the same time, there are no more consumer goods, since the industry is mainly building up military power.
📈My baseline scenario (excluding force majeure circumstances) assumes a gradual weakening of the ruble above 100₽ per dollar in 2025 and the possibility of a secondary acceleration of inflation after the start of a stable cycle of interest rate cuts.
🔥To secure my capital, I invest in reliable exporters (for example, Rosneft, NOVATEK, Gazpromneft, PhosAgro) and non-credit companies with a clean cash position that benefit from a tight monetary policy (Inter RAO, Surgutneftegaz, the same Lukoil Collector). shares.
💵And for this reason, I regularly buy reliable floating bonds, currency-linked products, and some cryptocurrency. However, if you follow the weekly editions of the Investment Marathon, you can get a rough idea of your purchase volumes and the shares you distribute to different assets. Well, I work 5/2 in a real industrial company, so I actually get an advance and a salary every month.
In my personal opinion (I admit, it's misleading), by the end of 2024 we will still see a rate of 20%. I don't know about you, but for me the figure of 19% evokes a feeling of some kind of... incompleteness or something like that. This year I have a desperate desire to round this figure to 20% and calm down. Do you know this feeling?😅
🤪For example, I currently have only 9 Lukoil shares in my Sberbank brokerage account, but I really want to buy 10 shares. It seems that round numbers contain smaller figures. I wonder if Nabiullina has the same ratio🤔