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MNI CBR Preview - July 2021: CBR to Hike +75bp, Material Risks to “One-Off” +100bp Hike

Despite the broad uncertainty surrounding this meeting, we see the CBR delivering a +75bps hike with risks to +100bps as sharply overshooting CPI continues to drive policy rates beyond the 5-6% neutral range in the near-term.

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Executive Summary:

  • CBR expected to rase its Key Rate +75bp, with material risks to +100bp
  • Headline & Core CPI rose to 6.5% & 6.6% Y/Y in June, with expected to tick higher to 6.7% Y/Y in July
  • However, demand-side drivers evident in growth-related high-frequency data have shown signs of moderation in June alongside weekly CPI prints in July
  • Although base effects are expected to filter through in the coming months, CBR will not wish to continue chasing data and rather act decisively to anchor runaway expectations through a larger hike than the prior two +50bp meetings - which have done little to temper overshooting pressures in CPI
  • Guidance in the prior meeting and subsequent TV interviews has also been hawkish, stressing that "the balance of risks had shifted significantly towards pro-inflationary ones"
  • Nabiullina will likely also be careful to retain the prior meeting's relatively hawkish tone - alluding to data-dependent future developments until the decceleration in pro-inflationary factors becomes more deeply ensconced.
  • Medium term forecasts are expected to be revised higher in terms of average and year-end inflation. 2021 Growth forecasts may also be revised higher towards 4.0%.
Full Preview Here:

CBR Preview 23.07.21.pdf


Despite the broad uncertainty surrounding this meeting, as reflected in the +50-100bps range of expectations, we see the CBR delivering a +75bps hike with risks to +100bps as sharply overshooting CPI continues to drive policy rates beyond the 5-6% neutral range in the near-term. Elevated uncertainty in the pricing outlook may see the CBR seek to retain the optionality of a further +25-50bps in the pipeline for September, should prices fail to moderate on favourable base effects.