Page 73 - RUSRptOct18

The move shows that the CBR is taking sanction risks seriously as instead of keeping the rate unchanged and resorting to issuing a tougher guidance, it decided to front-load with a 25bp hike ahead of the anticipated US sanction toughening this autumn.
The CBR had already indicated that no rate cuts should be expected any time soon, as the governor of the CBR Elvira Nabiullina said last week that the regulator sees “little if any” reasons for monetary easing, naming high global financial market volatility and inflation moving closer to 4% target faster than expected under external pressure as main risk factors.
The move also bolsters Nabiullina’s reputation as one of the most conservative central bankers in the world and underscores the central bank’s independence as the government would have preferred to see a growth-boosting cut in rates.
The CBR's interest rate action surprised Russia’s analysts and defied the government, but did not make as bold a move as the central bank of Turkey that on September 13 ramped up the rate up by surprise 6.25pp from 17.75% to 24%, trying to tame the weakening of the currency and rising inflation. Out of 24 analysts surveyed by Reuters 23 expected the CBR to maintain the rate at 7.25%.
However, Sberbank CIB allowed for a rate hike of up to 50bp to prevent the continuous selloff of Russian assets. Other analysts too claimed that the market expects the CRB to react and has priced in at least 25bp rate hike, with any decision more dovish than that possibly triggering renewed selloff..
73 RUSSIA Country Report October 2018 www.intellinews.com