Page 115 - RusRPTApr24

showed moderate growth, reports Renaissance Capital.
“There’s little sign in the communications of a softening in the central bank’s hawkish tone and any suggestion just yet that it is looking to reverse the aggressive monetary tightening it delivered last year,” said Liam Peach, an emerging market economist with Capital Economics. “The latest inflation data have been encouraging but the central bank is waiting for a further easing in price pressures. We still think that inflation will end the year above the central bank’s 4.0-4.5% target due to rapid economic growth and loose fiscal policy, but it’s looking more likely to us that the central bank might start an easing cycle in the third quarter once inflation has clearly reached a peak.”
The CBR’s successful inflation targeting policy and decisive action since the war started has also helped to push down inflation expectations.
The population’s inflation expectations (on a one-year horizon) decreased by 0.4 percentage points in March for a rise to 11.5%, according to InFOM.
“This is the third consecutive decline [in expectations] since the December peak, and the current level is in line with last year's average,” Rencap said in a note. “Price expectations of enterprises monitored by the Bank of Russia have been declining for the fifth month in a row amid reduced cost pressures.”
According to the CBR’s March macroeconomic survey, price expectations, the share of respondents expecting prices to rise in the next three months, minus the share expecting them to decrease, decreased by 0.5 percentage points. to 18.7%, which is the lowest level since the summer of 2023, but still noticeably above long-term averages, Recap reports.
“Analysts have revised their inflation forecast upwards to 5.2% in 2024 (+0.3 p.p. compared to the February survey). Analysts expect that inflation will return to the target of close to 4% in 2025 and remain at this level further on,” the CBR said in its March survey of analysts.
The trends emerging in March in terms of price growth rates and inflation expectations form a neutral background for the Bank of Russia’s decision on the key rate, says Rencap.
The Bank of Russia may reduce the key rate to 12-13% in 2024, VEB.RF Chief Economist Andrey Klepach told TASS. Earlier, the board of directors of Russia’s Central Bank decided to keep the key rate at 16% per annum, noting that the current inflation pressure had decreased compared with autumn months, still remaining high though.
115 RUSSIA Country Report April 2024 www.intellinews.com