Central Bank: Cash returns to banks will continue

In the first quarter of this year, the return of cash to banks will continue, according to the Bank of Russia’s commentary on the medium-term forecast. At the same time, the regulator adjusted the cash growth rate by 0.7 trillion to 0.5-0.9 trillion rubles.

Against the backdrop of high deposit rates, cash will continue to be returned to banks. The volume of cash in circulation will grow by the end of the year by 0.5-0.9 trillion rubles, according to the updated forecast of the Central Bank.

Last year, the volume of cash in circulation increased by 2 trillion rubles, exceeding 18 trillion rubles, the regulator noted. However, in the last months of 2023, as follows from statistics, the growth of cash in circulation for the first time since the spring of 2022 switched to a prolonged decline - that is, an influx into banks.

“Short-term money market rates in conditions of liquidity shortage are usually formed above the key rate of the Bank of Russia,” the regulator notes. — If demand for Bank of Russia loans continues, the effective cost of short money for banks can reach 20-40 bp. to the key rate (or 16.2−16.4% - RG note). This, other things being equal, will make a small contribution to increasing the tightness of monetary conditions.”

At the same time, during 2024, the banking sector will move from a surplus to a liquidity deficit. “At the end of 2024, the forecast for the structural liquidity balance has been reduced by 0.7 trillion rubles and is estimated to range from a deficit of 0.7 trillion rubles to a surplus of 0.1 trillion rubles,” the Central Bank comments.