Page 59 - RusRPTOct19

The Ministry of Economic Development also expects inflation at 3.6-3.8% at the end of 2019, already below the CBR target of 4%.
Analysts surveyed by Vedomosti believe that the CBR will continue switching to moderately loose monetary policy and cut the rate, although it will probably pause during the next meeting. As the same time the regulator previously showed no hesitation in increasing the rate considerably in unfavourable external conditions.
Last year the CBR briefly hiked rates, raising them twice in September and December, despite a fall to a record post-Soviet low of 2.3% last summer, in anticipation of new US harsh sanctions and a VAT hike of 2pp that came into effect in January. However, the sanctions never appeared and the economy absorbed the VAT hike more easily than expected. At the time bne IntelliNews argued that the show down with the US had induced a “war mentality” in the CBR, but this week’s cut represents a return to “peacetime” economic management.
Previously Sberbank analysts argued that the CBR sees the inflation-neutral key rate in 2020, suggesting that the neutral key rate is below 7.00% and arguing that the regulator might opt for a pause after reaching the threshold.
The CBR managed to bring down inflation from double-digit readings to a post- Soviet low of 2.3%-5% between the summer and the end of 2018. The inflation-targeting regulator was generally inclined towards moderately loose monetary policy, but it had been thrown back by a worsening in sanctions and the external environment in April 2018.
59 RUSSIA Country Report October 2019 ww.intellinews.com