MNI CBR Preview - December 2024: Another Hike Justified
Executive summary:
- The CBR is expected to hike its key rate again this month amid a lack of improvement across the main inflation indicators.
- The impact of a weaker ruble further justifies a more hawkish approach to policy, but a slowdown in lending activity will likely narrow the scope for additional tightening beyond this juncture.
- As per a Bloomberg survey, 10 out of 12 analysts expect a rate hike, though estimates range from a hike of as small as 100bps to as large as 300bps.
See the full preview, with a summary of sell-side analyst views, here:
The CBR’s rationale for the 200bp rate increase in October was that “the balance of inflation risks is still significantly tilted to the upside,” meaning further tightening was required to ensure the return of inflation to target and reduce inflation expectations. Given the lack of progress on both of these fronts, similar thinking will guide towards another hike this month, though the scale of the rate hike to be delivered remains uncertain.
Local analysts say the ruble's downward spiral will likely spur inflation, meaning the CBR will have to hike its key rate this month and potentially even in 2025 as well. Citing a CBR advisor, Interfax reported that a longer period of hawkish monetary policy will be required to restore price stability with end-2024 inflation currently trending towards the upper bound of forecasts.