Page 111 - RusRPTOct22

in September from 12% to 12.5%.
"The decline in the overall inflation rate was largely due to the ongoing correction of prices for goods and services after their surge in March. The exchange rate dynamics of the ruble and the generally subdued dynamics of consumer demand contributed to this. An additional disinflationary factor was the expansion of supply on some commodity markets amid continued external and domestic export restrictions," the CBR commented.
As far as further key interest rate decisions until the end of 2022, the CBR said it will "make further decisions on the key rate taking into account the actual and expected dynamics of inflation relative to the target,” while guiding for “neutral monetary conditions”.
The CBR still has another two meetings scheduled in 2022 for October and December, and the analysts surveyed by Bloomberg and by RBC business portal prior to the key rate decision expected the key interest rate to decline to 6.5%-7%.
However, at the press-conference following the policy rate decision the Governor of the CBR Elvira Nabiullina did not provide clear guidance for further key rate cuts, noting that current uncertainty in budget spending and its impact on the real economy make it difficult to predict further interest rate movements.
While the analysts previously saw the neutral interest rate at 5-6% and expected it to be reached by 2024, Nabiullina stated that the rate was already in the neutral range and for the first time since the current easing cycle even allowed that the next rate move could also be a hike. She stressed that the interest rate "easing cycle is nearing completion".
"With this level of the key rate, we estimate that we are in a neutral monetary policy (monetary policy) zone. We see one-off disinflationary factors gradually losing strength and pro-inflationary risks increasing. We believe that the space for further key rate cuts has narrowed," Nabiullina said.
Renaissance Capital analysts thus expect that the CBR will sit the uncertainties of the first winter under sanctions out, keeping the rate unchanged in October and December meetings. RenCap then expects the lowering of the rate to 6.5% to be postponed to the end of 2023.
The analysts surveyed by RBC business portal after Nabiullina’s September 16 comments have revised their key interest rate forecasts from 6.5%-7% to 7%-7.5% by the end of the year.
The analysts at RenCap remind that the average key rate was around 7.75% when inflation stabilised near the 4% target in 2017-2019, which makes the current 7.5% a comfortable rate level for the CBR. However, given that the
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