Page 64 - RusRPTJuly18

CBR, as inflation is currently is still way below the target, according to previous statements by the minister Anton Siluanov.
But analysts at Aton Equity agree that, "higher VAT could put pressure on inflation expectations as soon as in 2018, as firms are likely to start raising prices in advance."
Combined with the recent substantial increase in petrol prices and the sell-off in in EM currencies in recent weeks driven by Fed rate hike, the VAT tax increase "is likely to further support the CBR's conservative approach," Aton commented on June 15. Increases in the cost of petrol at the pumps has been the topic of conversation and president Vladimir Putin spend a full 15mins addressing questions on the topic during his recent annual marathon phone-in.
The analysts forecast that the regulator is "most likely to take a pause in rate cuts, and that the pause could last for several consecutive meetings until the effect on inflation expectations crystallises," while allowing that "rate cuts might continue in autumn, bringing the key rate to 6.75-7% at the end of 2018."
RUSSIA Country Report July 2018 www.intellinews.com