Page 6 - RusRPTMar20
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2.0 Politics
2.1 CBR switches tactics from prudence to stimulus
The Central Bank of Russia (CBR) has switched tactics from running a prudent monetary policy to a more aggressive attempt to stimulate economic growth following its February 7 decision to shave another 25bp off the key monetary policy rate to 6%, say analysts.
Inflation in January fell to an annualised rate of 2.4%, well below the CBR’s target rate of 4%, giving the regulator ample room to cut rates. But the most recent decision to cut was still early according to many analysts and signals that the central bank now feels comfortable with the inflation rate and will focus more on reducing interest rates in an effort to boost economic growth in 2020.
The Ministry of Economy is forecasting around 2% growth in 2020, which is ahead of the International Monetary Fund (IMF) prediction of 1.9%, but investment banks are becoming increasingly optimistic that growth will outperform this year on the back of an anticipated boost in state spending. But the outlook remains confused and the spread of predictions is wide ranging from BCS GM 2% to Renaissance Capital’s prediction of 2.6%.
The CBR’s language changed in the press release following the announcement of the cut indicating it was more focused on boosting growth than preparing for sanctions or other external shocks. The spread of the Coronovirus has dampened the mood somewhat, but Russia’s “fiscal fortress” is complete with international gross international reserves (GIR) now above the pre-crisis levels and approaching $600bn while external and public debt is now entirely covered by cash reserves. Russia’s economy is currently in an unassailable position.
6 RUSSIA Country Report March 2020 www.intellinews.com
