VTB announced a record 7-year growth in deposit rates in Russia

by time news

The weighted average rate on ruble deposits in Russia by the end of this year may grow 1.7 times, which is a record increase since December 2014, when the Central Bank sharply raised the key rate from 10.5 to 17%, provoking a twofold increase in market rates, said Head of the Savings Department of VTB Maxim Stepochkin.

According to the Central Bank, the weighted average rate on ruble deposits for more than a year in rubles in January 2021 was 4.18%, while in October it was 6.07%. The key rate during this time increased from a historically low 4.25% to a record 7.5% since July 2019. At the same time, analysts expect that at a meeting on December 17, the Central Bank’s board of directors will increase the indicator by another 1 percentage point. The chairman of the regulator Elvira Nabiullina also said about such a possibility.

“By the end of 2021, we expect an increase in weighted average rates on ruble deposits with maturity over a year by more than 1.7 times – thus, average rates on them may reach 7.5% per annum or more. The decisive factor will be the decision of the Bank of Russia at the upcoming meeting on Friday on the key rate, which may grow to 8.5%, that is, actually double by the end of the year, “Stepochkin said.

Against this background, interest rate risk arises, he added. So, at the beginning of 2015, when the Central Bank began to reduce the key rate, it was realized for many banks – first of all, for long-term deposits with the possibility of replenishment. But today such a scenario is unlikely, since credit institutions have ceased to offer deposits with a replenishment option at high rates for long periods and have begun to limit the attraction to maturities of 1.5-2 years, a VTB representative explained.

Stepochkin added that the growth of interest rates on deposits again made this instrument popular among the population and made it possible to neutralize inflationary losses. Inflation amounted to 8.4% in November, Rosstat reported. This is more than double the Central Bank’s target of 4%.

According to VTB, in the first half of 2021, citizens withdrew over 865 billion rubles from ruble deposits, but in July-October they returned half of this amount there. The bank believes that this trend will continue in November and December.

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