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about 1ppt, with higher food prices still having a significant impact, although slightly less of an FX pass-through. According to Ms. Nabiullina, CBR is concerned that elevated inflation expectations and global supply constraints could have an extended impact on inflation.
· Russia’s economic performance was better than expected, and the economy could return to its 2019 levels this year instead of in 2H22 as previously expected.
· Although CBR has started gradually moving towards a neutral stance, the baseline scenario assumes a loose monetary policy in 2021 mainly due to higher inflation. The key prerequisite for returning to a neutral policy is the stabilization of inflation around 4%, according to Ms. Nabiullina.
· Finally, CBR is preparing to publish its forecasted key rate trajectory from April. Ms. Nabiullina did not disclose all of the details, but it could take the form of a range within the forecasting horizon.
· On a separate note, CBR will maintain a longer-term (12 months) REPO program given the volatility of the banking sector’s liquidity. The subsidized mortgage program should gradually wind down except in those regions with housing shortages.
The CBR has not accounted for unspent funds from the 2020 budget (e.g. RUB1trillion, of, which RUB600bn can be used at its discretion), which could support consumption, keeping inflation elevated.
99 RUSSIA Country Report March 2021 www.intellinews.com