Page 121 - RusRPTJul22

8.2 Central Bank policy rate
The board of the Central Bank of Russia (CBR) cut the key interest rate by 150 basis points from 11% to single-digit 9.5%in June - the forth cut since the war started in February -, projecting confidence in managing the sanctioned and isolated Russian economy as it brings the interest rate to where it was prior to the military invasion of Ukraine.
As followed by bne IntelliNews, the CBR held an unplanned ahead-of-schedule policy meeting on May 26, at which the board of the regulator slashed the key interest rate by 300 basis points (bp) from 14% to 11%. This made an aggressive cut exceeding the expectations of a 200bp key rate reduction and the third cut in two months.
Now the CBR brought the total cuts to 10.5 percentage points since it jacked up the key interest rate to 20% in the emergency mode following Russia’s military invasion of Ukraine.
This time too, the CBR cut the rate by 50bp more than expected by the market, as the consensus expectations were of 10% interest rate. The CBR projects confidence that inflation and ruble rate is where it wants it to be, while being more concerned with reviving economic growth.
The CBR has revised the inflation forecast for 2022 downwards from 18-23% previously to 14-17%, while commenting that "important factors for further inflation dynamics will be the efficiency of import substitution processes, as well as the scale and speed of recovery of imports of finished goods, raw materials and components”.
The CBR still expects annual inflation to fall to 5-7% in 2023 and return to the target 4% in 2024. At the same time some analysts warned that the inflationary situation could worsen in the second half of the year and the worst could yet come from the sanctions.
As bne IntelliNews reported, the whole world is facing the danger of stagflation as inflation rises everywhere, driven up by food prices due to a global food crisis caused in part by Russia’s war on Ukraine.
So far the CBR seemed to be confident in economic performance, as it noted that “the slowdown in business activity, after a sharp fall in April, came to a halt in May”. The regulator also appeared to warn the government and Kremlin against further attempts to ramp up
121 RUSSIA Country Report October 2020 www.intellinews.com