Page 137 - RusRPTApr23

8.2 Central Bank policy rate
The statement accompanying the Russian central bank’s (CBR’s) decision to keep its policy rate unchanged at 7.50% stuck to the hawkish script from February. While it didn’t confirm that an interest rate hike is on the cards at the next meeting in April, we think a 50bp increase remains more likely than not.
Today’s interest rate decision wasn’t in doubt. We and all the other analysts polled by Refinitiv expected that the policy rate would be left on hold. And there weren’t many changes to the statement compared with that published in February. Reading between the lines, it looks like the falls in the headline rate of inflation last month, to 11.0%, as well as in inflation expectations have eased the CBR’s inflation concerns a little.
But pro-inflation risks remain the order of the day. These stem from multiple sources including accelerating government spending and a tight labour market (driven in part by last year’s reservist mobilisation). The statement only made a passing reference to the turmoil in the global banking sector this past week, noting that moves in financial market could provide an additional inflationary concern.
There was nothing in the statement to confirm that an interest rate hike is now a done deal at the next meeting in April. The statement retained the line that “if pro-inflation risks intensify, the Bank of Russia will consider the necessity of key rate increase at its upcoming meetings”. But with inflation pressures likely to build, we remain of the view that the CBR will deliver a 50bp interest rate hike, to 8.00%, in Q2 (probably in April).
137 RUSSIA Country Report Russia April 2023 www.intellinews.com