Page 112 - RusRPTJan21

COVID-19 and vaccines. The mid-term trajectory depends on the progress of the pandemic, the recovery in private demand, structural shifts in consumption and an accommodative monetary policy.
● CBR does not think deflationary risks will be as significant in 2021 as it did during its previous meeting due to inflationary risks and their secondary effects. In the mid-term, the risks of volatility on global financial markets, disruptions in supply chains, the additional cost-push to preserve workers' health and price spikes in soft commodity markets could skew the balance. The worsening COVID-19 situation, the damage to economic structures and trade wars could have a meaningful impact on long-term potential. CBR still sees the fiscal consolidation as a crucial disinflationary factor in 2021-22.
“The tone of CBR’s statement appeared to be more reserved vs. the previous meeting. We believe that CBR could keep the key rate on hold throughout 1Q21 given the rise in inflationary pressures despite government attempts to stem the growth in food prices. If Russia’s economic growth gains traction in 2021 as we expect, it would not make sense for CBR to ease the policy stance further in 2Q21-4Q21 and prepare for the policy normalization cycle from 1H22,” Sova Capital said in a note.
In its statements the CBR’s reasons for its decision were as follows: The tone of CBR’s statement is less dovish and analyst say they believe the CBR could keep the key rate on hold throughout 1Q21 given the rise in inflationary pressures despite government attempts to stem the growth in food prices.
Russian President Vladimir Putin in recent weeks have been complaining about the rising cost of pasta and sugar and the government is currently negotiating with the major food producers to cap price rises temporarily.
“If Russia’s economic growth gains traction in 2021 as we expect, it would not make sense to ease the policy stance further in 2Q21-4Q21 and prepare for the policy normalization cycle from 1H22,” Sova Capital said.
112 ​RUSSIA Country Report​ January 2021 www.intellinews.com