Page 110 - RusRPTOct22
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8.2 Central Bank policy rate
The Board of the Central Bank of Russia (CBR) resolved to cut the key interest rate by 50 basis points (bp) to 7.5% at its policy meeting of September 16, making a sixth consecutive cut, but slowing the pace of monetary easing in line with expectations.
As followed by bne IntelliNews, in July the CBR continued its aggressive rate-cutting cycle, slashing rates by another 150bp to 8%, well below pre-war levels.
The CBR more than doubled the interest rate to 20% on February 28, a few days after Russian forces crossed the border into Ukraine, to contain the inevitable shock to the currency and to contain soaring inflation. The fast action seems to have worked, as inflation had begun to fall from its peak of 17.8% in April to 15.9% in June (chart).
For the upcoming meeting of September 13, nine out of twelve economists in the Bloomberg survey predicted that the CBR would slow down the rate-cutting to a 50bp drop to 7.5%.
“After a lot of surprises, the CBR’s decision finally matched consensus expectations,” BCS Global Markets commented, seeing the 50bp rate cut as a reflection of a “relatively comfortable disinflation landscape and current economic weakness”.
"The current rate of increase in consumer prices remains low, contributing to a further slowdown in annual inflation. This is due to both the impact of a set of one-off factors and subdued consumer demand. The dynamics of business activity are shaping up better than the Central Bank of Russia (CBR) had anticipated in July," the regulator commented in a press release that accompanied the latest interest rate decision.
This wording of the statement confirms previous reports that speculated that the CBR is paying more attention to economic recovery and activity, apart from watching inflation.
As far as inflation is concerned, the latest weekly data suggested that despite local spikes in consumer prices, the deflationary trend is far from being over. Indeed, the CBR has improved its inflation forecast, anticipating 11-13% annual consumer price growth for 2022 versus the previous forecast of 12%-15%, while still expecting inflation to return to a 4% target in 2024.
Still, the CBR decided to moderate the pace of monetary cutting due to deflation slowing down and inflation expectations of the population heating up
110 RUSSIA Country Report October 2022 www.intellinews.com