Page 19 - Russia OUTLOOK 2022

but one that it already had well in hand as 2021 came to a close. Russia was hit by persistently high inflation in 2021 which peaked at 8.4% in November, having rinsen post Soviet lows of under 2% in 2019.
Following a 100bp hike at the December CBR meeting Russia ends 2021 with a prime rate of 8.5%, bringing the rate above the 8.1% inflation rate as of November, the last result available. However, weekly data in December suggests that inflation has peaked and will start falling in the first quarter of 2022.
The key rate could rise to 9% in the first half of 2022, but analysts speculate there could be two rate cuts in the second half of the year bringing the rate back to 8%-8.5%.
The forecast for 2022 in the CBR’s December survey increased by 1 p.p. to 7.8% per annum. The 2023 forecast rose 0.7 p.p. to 6.3%. Further, analysts expect the key rate to average 5.5% per annum thereafter.
The Bank of Russia is way ahead of the curve with monetary tightening. It was one of the first central banks to start rate hikes and one of the first to realise that inflation is not just a temporary phenomenon. By now, the rate hike cycle in Russia is almost done and remaining hikes are apparently fully priced in by
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