Page 40 - RusRPTMar21

tighten its monetary policy. When the CBR’s BoD meet next on 12 February we do not expect the bank to change its key rate from the current level of 4.25%. We believe that the CBR will extend the rate pause again in March in anticipation of a reversal in the inflation trend from 2Q21 onwards. One big risk factor is the RUBFX rate: a new wave of weakening in the currency in February-March would boost import prices in 2Q21 or at a time when food imports reach their highest levels in the consumer basket of many Russians. We retain our YE21 forecasts of CPI at 3.9% and CBR key rate unchanged at 4.25%.
4.2.2 PPI dynamics
After falling to a low of -14.1 in May 2020 during the bowl of the coronacrisis producer price index of inflation (PPI) has been slowly rising and went back into the black in the fourth quarter of last year as the economy slowly started to recover. The upward trend has gathered momentum and PPI reached 6.7% year-on-year in January of this year. The CBR says that inflation is likely to peak in the first quarter as the devaluation effects from 2020 work their way through the system. However, inflation is likely to remain a problem for most of 2021.
40 RUSSIA Country Report March 2021 www.intellinews.com