Page 69 - bne IntelliNews Country Report: Russia Dec17

($44.42 mn) in the first nine months of this year, after getting caught up in the collapse of Financial Corporation Otkritie. and insurer Rosgosstrakh. The fund, controlled by the family of businessman Boris Mints, owns a 4% stake in Otkritie, which was taken over by the central bank in August. As a part of the bailout, shareholders may see their stakes written off in full. Rosgosstrakh is also being bailed out as a part of the Otkritie group’s financial assets. When asked about its exposure to Otkritie, Budushchee referred to media reports saying it could lose up to RUB12bn if its stake in the lender is written off in full. Budushchee, which is Russian for “future”, has 4.5mn clients and 300bn of pension funds under management.
Russia's largest insurer R osgosstrakh saw losses increase by two thirds to RUB35.3bn ($585mn) in January-September 2017, widening the loss by 60% year-on-year, according to Russian Accounting Standards (RAS) report.
8.2 Central Bank policy rate
At its regular meeting in October, the Central Bank of Russia's board again lowered the key rate . The 25-basis-point cut to 8.25% took effect on October 30.
The central bank board noted that, while the slowdown in 12-month inflation continued in October with inflation dropping below 3%, it was due mainly to transient factors . In addition, the CBR said that the fall in inflation expectations is not yet sufficiently large, sustainable and broad-based to justify more robust rate cuts.
The rate cut was in line with market expectations. The latest cut included a slight change in the CBR's forward guidance. Earlier cuts were accompanied with messaging about the need to maintain a moderately tight monetary stance, but now the CBR referred to a gradual shift from the moderately tight stance to neutral monetary policy.
Russia's President Vladimir Putin sees room for further key interest rate cuts by the Central Bank of Russia (CBR) given the low inflation, Russian newswires reported on November 9.
The Kremlin could join the government in increasing the pressure on the CBR to cut the key rate faster, as lower interest rates are needed to reach the ambitious 2% GDP medium-term growth goal.
The announcement comes on the week when zero weekly inflation is posted for two consecutive weeks and all-time-low inflation of 2.7% y/y was recorded in October making rate cuts more appealing.
Inflation is now going to come in lower than expected by the government earlier in the year and possibly fall to 2.5-2.7% for all of 2017, whereas the previous full year goal was 4%. That is a "signal for further cuts in the key interest rate," Putin reportedly said, as cited by Interfax.
"It's a clear message to the CBR this side of the presidential election - the boss wants lower rates," Timothy Ash of Bluebay Asset Management commented in a note to clients on November 9.
However, the CBR remains reluctant to rush the rate cuts, pointing to stubborn
69 RUSSIA Country Report December 2017 www.intellinews.com