Page 122 - RusRPTJul22

social spending, writing that “tighter monetary policy may be required in case of an additional widening of the fiscal deficit”.
The government just announced a boost to pensions as part of RUB1.6 trillion social spending package to counter the effects of the sanctions and to compensate for the rising prices. In all the Ministry of Finance says it may spend as much as RUB4 trillion on social support this year.
The analysts surveyed by RBC business daily also note that the CBR cut the rate faster than expected, but reminded that the CBR guided for a slower cut in rates once it comes to single-digit territory. The Head of the CBR Elvira Nabiullina previously said that the regulator could return to its “standard” steps (of 25 basis points rate cuts), once the key interest rate goes below 10%.
Renaissance Capital on June 10 noted that the CBR chose one of the most dovish wordings when guiding for future rate decisions: "the Central Bank of Russia will assess the appropriateness of a key rate cut at the next meetings”.
“This prepares us for further rate cuts to be smoother and more cautious. In July we could see another 50bp cut to 9%. We maintain our key rate forecast at 8.0% at the end of 2022,” RenCap analysts believe.
The CBR commented on its rate cut decision on 10 June 2022 adding more detail on the reasons for its decision to cut further than the market expected.
Recent data suggest that price growth rates in May and early June have been low. This comes as a result of ruble exchange rate movements and the tailing-off of the surge in consumer demand in the context of a marked decline in inflation expectations of households and businesses.
“Moving forward, in its key rate decision-making the Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic transformation processes, as well as risks posed by domestic and external conditions and the reaction of financial markets. The Bank of Russia will consider the necessity of key rate reduction at its upcoming meetings. According to the Bank of Russia’s forecast, given the current monetary policy stance, annual inflation will total 14.0–17.0% in 2022, decline to 5.0–7.0% in 2023 and return to 4% in 2024,” the bank said.
122 RUSSIA Country Report October 2020 www.intellinews.com