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bne February 2020 Eurasia I 45
continue in 2020 that will also boost growth. Both the CBR and NBU started aggressively cutting rates in the last quarter of 2019 and with inflation anticipated to keep falling, plus the extremely high real interest rates in both countries, there is plenty of room for more cuts.
In Russia, VTBC expects the CBR to continue easing and deliver at least two more 25bp cuts in 2020, taking the key rate to 5.75%. In Ukraine, VTBC forecasts the policy rate to come down to 8.00-8.25% by end of the year.
“Ukraine is the only country in the group where the central bank provides
a type of interest rate forward guidance, and our estimates broadly match the guidance for 1H20, but suggest space for steeper easing in 2H20,” says VTBC.
Belarus lowered its interest rates to
9% from 9.5% in November, saying inflationary pressures continue to
fade in the third quarter of 2019. In September the annual inflation rate was down to 5.3% in line with the central bank’s predictions and the board of governors expect inflation to fall to
5% in 2020.
“In Belarus, policy rate outlook remains less certain, as the country is still transitioning to the inflation targeting
regime, but our estimates suggest a potential for easing to 7.5-8.0% by year end 2020,” VTBC said.
And in Kazakhstan, VTBC expects 0.75-1.00pp of easing on the back
of stabilisation of headline inflation growth. Such a scale of easing in 2020 would roughly put the policy rate in line with the National Bank of Kazakhstan’s (NBK) estimate of the 3.0-3.5% range for the real neutral rate (with the
usual caveat regarding the uncertainty attached to such estimates).
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