MNI CBR Preview - July 2024: "Significant" Rate Hike Expected

Executive summary:

• The Central Bank of Russia is expected to hike its key rate by 200bps to 18% after price growth in Russia accelerated for the sixth straight month.
• The central bank has held the benchmark at 16% since December, but Governor Nabiullina and other officials have warned that a “significant” rate hike will be needed if inflationary pressures don’t start to fade.
• Indeed, the CBR have recently published several documents in which it indicated that monetary policy needs to be tightened further and kept this way for a longer period than it had previously anticipated.

See our full preview, with a summary of sell-side analyst views, here:

MNICBRPrevJul24.pdf

Since the previous rate decision, inflation data has continued to point to strong demand-side pressure, with the June figure coming in at +8.59% Y/Y compared to +8.30% in May. Meanwhile, the core indicator rose from +8.27% Y/Y to +8.64%. Staples such as vegetables have become 19% more expensive compared to the previous year, with prices climbing by 2% on a month-on-month basis. At the same time, weekly data indicates that inflation has continued to accelerate through July.

The data supports hawkish comms from central bank officials, with Governor Elvira Nabiullina warning that a “significant” rate hike in July will be needed if inflationary pressures don’t start to fade. She has previously stated that a “significant” rate hike is one of at least 2ppts. Meanwhile, according to Tass, Deputy Governor Alexey Zabotkin said earlier this month that rate-setters will most likely consider a hike of 100-200bps at the July meeting.