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cost/income.
Ruble weakening inflated nominal balance sheet growth, but even factoring this in, loan growth was very strong, with corporate lending up 11% as the bank allocated excess liquidity to short-term working capital loans, while retail rose 6%.
The management also confirmed that the bank plans to list its preferred shares on the Moscow Exchange. There are only 20mn prefs (versus 476mn commons), which were issued many years ago, and the listing follows several requests from shareholders to make them tradable. This implies no change to the dividend policy or the share count, and there are no plans for conversion.
8.2 ​Central Bank policy rate
The Central Bank of Russia kept the key interest rate at 4.25%, in line with the expectations of market analysts ​at its meeting on October 23. In its decision, it noted that inflation had developed in line with the central bank’s inflation forecast. In its instructions, the central bank did not rule out a possible rate cut at subsequent interest rate meetings.
Annual inflation was 3.7% in September. Inflation has been exacerbated by the weakening of the ruble in recent months. One dollar already received more than RUB80 momentarily and one euro almost RUB94 in the first week of November.
Since the beginning of June, the ruble has depreciated by 14% against the US dollar and by 17% against the euro. With the weakening of the ruble, inflation expectations have risen, which could raise the prices of goods and services in the coming months. On the other hand, inflation has been weakened by the slowdown in domestic demand after the summer. Inflation may also be slowed down by the potential for output to remain below potential.
The central bank estimates annual inflation to be 3.9-4.2% at the end of this year. For next year, the central bank forecasts inflation of 3.5–4%. After that, it expects inflation to remain close to four%. The central bank's inflation target is 4% annual inflation.
The central bank also updated its GDP growth forecast for Russia for this year and next. It predicts the economy will shrink by 4-5% this year, which is 0.5 percentage points less than previously estimated. According to the central bank, the change is mainly due to the better-than-expected development of exports in the spring. The central bank forecasts economic growth next year of 3-4%, which is 0.5 percentage points less than previously expected. The
81 ​RUSSIA Country Report​ December 2020 www.intellinews.com