Structural surplus of banking sector liquidity continues its decline in April
In April, the structural surplus declined due to the persistent — but weaker — growth of cash in circulation, and expansion of required reserves after the banks' liabilities were adjusted for foreign currency revaluation, notes the new issue of the information and analytical commentary 'Banking Sector Liquidity and Financial Markets'.
The spread between interbank lending rates and the Bank of Russia key rate became positive as the banking sector experienced liquidity outflow. The interest rate spread in the FX swap and interbank segments shrank. Despite a drop in oil prices, foreign currency liquidity faced favourable developments thanks to fiscal rule-based foreign currency sales by the Bank of Russia.
Global financial markets became stable in April. A number of countries announced a gradual easing of quarantine restrictions that, along with the measures to support the economy, will contribute to the recovery of economic activity. The more or less favourable external background, including climbing oil prices, helped a recovery in the Russian market as well.
Following the Bank of Russia's comments on possible monetary policy easing and the actual reduction of the key rate, market participants started to expect a significant policy easing by the end of the year.
In March, the corporate lending market expanded mostly due to short-term lending. Retail lenders also showed more activity, contributing to a less prominent annual slowdown of both mortgage and consumer lending. Mortgage rates hit all-time lows in March.