Page 63 - RusRPTFeb22

which is higher than in 2020 (4.2%). This is expected due to the normalization of the economic situation, the growth of profitability of deposits and volatility in capital markets.
The funds of the population on open escrow accounts for settlements under the DDU increased over the month by 90bn rubles, which is significantly less than in November (+167bn rubles). The main reason for the slowdown is the significant volume of escrow account disclosures in December due to the traditional for the end of the year, the mass commissioning of facilities is about 260bn rubles, which is a record value for the entire reform. At the same time, the inflow of new funds to escrow accounts remains significant due to the high rates of mortgage issuance.
In December, there was an outflow of public funds in the amount of 2.8 trillion rubles. (-31%) due to an increase in budget expenditures typical of the end of the year. However, some of this money was returned to the banking sector in the form of funds in the accounts of organizations and individuals. In total, since the beginning of the year, state funds have grown 1.6 times - this is a multiple more than in previous years (7.5% in 2020 and 7% in 2019), and is associated with the transition of the Federal Treasury to the Single Treasury Account.
Ruble denominated deposit rate hit a four year high of 7.74% on January 13. According to the CBR, the ruble denominated deposit rate at the 10 largest banks reached 7.74% at the end of 2021 – the highest level since May 2017, when the key rate was 9.25%.
Rates are high, but recent changes pressure CBR to hike rate again. In general, the current deposit rate mirrors the CBR’s policy tightening and plays in favor of inflation stabilization. However, we observed a number of fundamental factors that are likely to increase the need to hike the key rate at the next meeting on 11 February.
•First, the recent authorities’ decision to index pensions by 8.6% vs the planned indexation of 5.9%. Although this indexation is almost in line with FY21 inflation (8.4% y/y), such a step may hinder the CBR’ s efforts to curb inflation in the S-T.
•Second, the Ministry of Finance’s plan to purchase Rb586bn, or c$7.9bn, during the period 14 January-4 February, implying an increase in daily purchases of 60% m/m in January. Thus, this may add pressure to the ruble exchange rate and require an increase in the key rate.
•Third is the high weekly inflation for 1-10 January. Rosstat reported w/w inflation of 0.56% w/w driven by increased transportation costs and the pass-through effect from the ruble depreciation at the end of
63 RUSSIA Country Report February 2022 www.intellinews.com