Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive summary:
- The CBR are likely to hike its key rate at this juncture having held steady in the previous six consecutive meetings.
- In June, the central bank stated that inflation trends remain elevated and that risks are skewed toward pro-inflationary ones.
- Since then, inflation has continued to climb toward the Bank’s 4% target while a weak RUB, which has lost almost 30% of its value against USD YTD, and surge in fiscal spending continue to pose upward risks to inflation in the coming months.
- While there is no firm consensus among sell-side, estimates of the key rate decision range between unchanged and a 50-75bp hike.
The June CBR policy statement read the following: “In the context of a gradual increase in current inflationary pressure, the Bank of Russia admits the possibility of raising the key rate at the next meetings to stabilise inflation near 4% in 2024 and beyond.” Since then, inflation accelerated again in June, reaching 3.25% y/y from 2.51% y/y in May, driven by a rapid recovery in consumer demand, pass-through from recent RUB weakness and higher gasoline prices due to changes to taxation on petroleum producers. Though the headline figure remains below the 4% target, both core and headline inflation stood at 6.4% annualised and 6.5% annualised in June – well above target.
The main constraint that has been preventing the CBR from tightening policy has been that actual inflation momentum has remained very low compared to the long list of pro-inflationary risks. However, the arguments in favour of higher future inflation have not subsided, in fact, current underlying inflation momentum – driven by a weaker RUB and stronger economic activity – is now finally on the rise as well.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.