Page 97 - bneIntelliNews monthly country report Russia May 2024

that given the good dynamics in 1Q24, net profit and return on equity at the end of 2024 may be higher than the previously formed forecast (RUB 435bn and 19%, respectively).
Italy's UniCredit expecting push from ECB to reduce business in Russia. The news follows a similar warning received by Austria's Raiffeisen Bank International (RBI) on April 18 that the ECB was requesting an accelerated wind-down of its business in Russia.
8.2 Central Bank policy rate
The meeting of the Board of Directors of the Central Bank passed without surprises - the key rate was kept at 16% for the third time in a row in April. But the meeting was notable for the unexpectedly clear hawkish signal given by the regulator and its head, Elvira Nabiullina. The rate will most likely remain high for a long time, and inflation in 2024 will not return to the 4% target, Nabiullina admitted for the first time.
The Bank of Russia left the key rate at 16%. This happened for the third time in a row; The last time the rate changed was in December 2023: then its increase from 15 to 16% was the final one in the cycle of tightening monetary policy, which began in July.
Inflationary pressure is gradually weakening, but remains high, according to the reasons for the decision. Due to continued increased domestic demand, inflation will return to the target (4%. - The Bell) somewhat slower than the Central Bank planned in February; Returning inflation to target will require a longer period of maintaining tight monetary conditions than previously predicted, the Central Bank writes in its press release.
This is a stronger signal than after previous meetings, notes Kommersant - previously the regulator officially expected inflation to return to the 4% target in 2024, but now this statement has disappeared from the release, and the “long period” of maintaining a strict monetary policy has become “more long-lasting." At the same time, Elvira Nabiullina confirmed that the base scenario remains a transition to a rate reduction in the second half of 2024. But she admitted the possibility of maintaining it at the level of 16% or even increasing it. Monetary policy could have been even tighter if the Central Bank had not expected that from July 1, 2024, the government would refuse to extend preferential mortgage programs.
The Central Bank also worsened its formal inflation forecast for 2024: price growth is expected to be 4.3–4.8%, instead of the 4–4.5% mentioned in the February forecast. The regulator expects inflation to return to 4% in 2025. Inflation is accelerated, among other things, by the labor shortage, explained
97 RUSSIA Country Report May 2024 www.intellinews.com