Page 15 - RusRPTNov23

Key rate: As bne IntelliNews reported, CBR governor Elvia Nabiullina conducted an unorthodox experiment earlier this year, by letting the ruble significantly weaken while at the same time trying to control inflation by going slow on rate hikes. A weaker ruble creates more rubles for the government and so this was a monetary way of helping Russian Finance Minister Anton Siluanov close the budget deficit without borrowing or hiking rates.
But it went wrong. In the middle of August the ruble started to go into meltdown leading the CBR to put through a large 350bp rate hike on August 15 followed by another 100bp a month later. At least one more rate hike is expected this year as the ruble is still weak and inflation is rising.
“analysts expect a higher trajectory of the key rate. They have raised their expectations to 9.8% per annum (up 0.5 p.p.) on average in 2023 (assuming the average key rate of 14.2% per annum in October—December 2023), 12,6% per annum (up 2.6 p.p.) on average in 2024 and 8.2% per annum (up 0.5 p.p.) on average in 2025. analysts’ median estimate for the neutral key rate is unchanged at 6.0% per annum,” the CBR said.
15 RUSSIA Country Report November 2023 www.intellinews.com