CBR Statement Analysis: MPC Hawkish as Proinflationary Risks Remain Acute

CBR Statement Analysis:

• Overall, a hawkish statement from the CBR reiterating strong proinflationary factors driving a sustained deviation from the target with inflation continuing to develop above forecast.
• 100bp hike signals a continuation of the cycle with no signs of letting up yet to further anchor expectations, while additional suggestions of future hikes was more hawkish than most were expecting.
• The MPC pointed to sustained supply-demand imbalances and labour shortages keeping the balance of risks to inflation in favour of proinflationary risks and “appreciably” above the bank’s forecasts. These have been the dominant factors in recent statements and this was noticeable in today’s.
• As expected FY22 CPI was revised higher from 4-4.5% to 5-6%, while FY23 inflation remained at 4% with CPI returning to target by Mid-2023 – all hawkish revisions.
• Growth expectations remained the same at 2-3%, but the CBR warned that labour shortages may curtail industrial expansions. The average key rate also rose from 7.3-8.3% to 9-11% in another hawkish adjustment.
• Focus will now shift to Nabiullina’s presser at 1200GMT.