CBR Statement Key Points: Strong RUB & Softer Demand Allow for Policy Easing

Statement Key points:

• Recent weekly data indicate a slowdown in current price growth rates on the back of a strengthening of the ruble and a cooling of consumer activity
• With price and financial stability risks no longer on the rise, conditions have allowed for the key rate reduction

CPI:

• Annual inflation to continue to increase in the coming months to 18.0–23.0% in 2022* Annual inflation will slow down to 5.0–7.0% in 2023 to return to 4% in 2024
• Though having decreased slightly, proinflationary risks are still considerable & are primarily associated with a further exacerbation of external trade and financial restrictions
• Over a short-term horizon, the effect of proinflationary factors is likely to be accentuated by high and unanchored inflation expectations* Ruble exchange rate dynamics will remain a meaningful factor shaping the path of inflation and inflation expectations.

Activity:

• Bank of Russia’s baseline forecast, GDP will reduce by 8.0–10.0% in 2022, 0--3% in 2023 & +2.5-3.5% in 2024
• lending activity is decreasing, especially in the retail lending market.
• After a temporary surge, consumer demand is decreasing in real terms, accompanied by a rise in households’ propensity to save