Page 96 - RusRPTAug21

Zaigrin wrote.
“As a result, inflation is expected to remain higher for longer, with the YE21 CPI forecast revised by 1ppt. Inflation is expected to return to c. 4% by YE22 or in early 2023. The tone of CBR’s statement was calmer, and it pointed to the possibility of the policy being fine-tuned by 25-50bps, which could occur without any revisions to forecasts. Given the possible issues with harvests and new strains of COVID-19, which could lead to supply disruptions lasting longer than expected, we expect a 25bps fine-tuning of the policy sometime in September or 4Q,” he added.
RenCap analysts said that raise was above its forecast and at the upper end of market expectations. “The rate is now at the level we saw before the pandemic and above the long-term neutral range. This is due to the fact that the central bank is extremely concerned about the unrelenting inflationary pressure,” RenCap analysts wrote.
RenCap maintains its forecasts for the rate to be at 7.0% at the end of this year, falling to 5.75% at the end of 2022. “In our opinion, inflation will be below the expectations of the Central Bank and fall to less than 3% over the next 12 months, thanks to easing pressures from domestic demand and import prices," analysts said.
Meanwhile, monetary conditions “have been progressively adjusting to the earlier increases in the key rate, but are still accommodative,” the central bank governor said. RenCap's note commented: "tightening monetary policy should support the ruble: we expect it to strengthen to 70.1 / $ by the end of 2021 (from the current level of RUB73.6 / $).”
96 RUSSIA Country Report August 2021 www.intellinews.com