Page 104 - RusRPTMay21

tells me they see these remaining elevated for some time,” Tim Ash, senior sovereign strategist at BlueBay Asset Management said in a note emailed to clients.
The March increase was the first since 2018 and brought a more general easing policy to an end that has been in place since the CBR’s emergency increase to 17% in 2014 following an oil price shock that saw the ruble rate to the dollar collapse to RUB80.
The ruble recovered but has been through some wild swings since then, and weakened to RUB77.7bn the lead-up to the recent sanctions. It strengthened earlier this year to RUB73 as the post-pandemic recovery got under way, and strengthened again in the last day after Russia announced it was withdrawing its troops from the Ukrainian border to open at RUB75.4 on the morning of April 23. Following the announcement of the most recent hike it has strengthened further and was trading at RUB74.6 as of 3pm Moscow time on the same day.
Nabiullina began the year with an upbeat outlook on rate cuts, but given the rising inflation, analysts were expecting the CBR to hike rates by about 50bp over the course of the year.
But in March Nabiullina’s confidence obviously faltered and she wore a hawk brooch to the March press conference; the central bank governor has taken to wearing brooches that signal her mood at these events.
At today’s press conference she appeared to be wearing a brooch of the “golden mean,” a concept from ancient philosophy that represents a “desirable middle way” between two extremes of excess and deficiency and is the line that results from connecting the corners of tessellating boxes that double in size at each iteration. The curve also appears frequently in nature in the swirls on shellfish, for example.
The expectation for rate hikes has increased. In addition to the 75bp already added to the rate this year, analysts are expecting around 50bp more to be added up to the end of the year, making a total increase this year of 125bp.
The big unknown remains politics. While inflationary pressures already seem to be abating, the geopolitical tensions remain high as the Kremlin manoeuvres to set the tone at the start of the new Biden administration in a diplomatic dance that is one part aggressive posturing, like the military build-up around Ukraine, and one part outreach, like Russian President Vladimir Putin’s participation in Biden’s climate summit on April 22.
In addition, while inflationary pressures are easing, the expectations for inflation amongst the population have soared to 10% this year and the CBR is afraid of these expectations becoming unanchored, which in itself sends
104 RUSSIA Country Report May 2021 www.intellinews.com