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 widely expected to keep the key rate unchanged at 12% having front-loaded rate hikes at the emergency meeting in August.
- Strong consumption growth has been increasing the demand for imports, reducing the size of the current account surplus and weakening the RUB.
- Therefore, there remains risk of a rate hike of as much as 100bps at the September meeting as the Bank look to juggle a recovery in the inflation rate, curtailed export revenues and domestic financial fragility via the FX channel.
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In August, the CBR delivered a 350bp rate hike at an unscheduled meeting, taking the key rate to 12%. The decision followed the USDRUB exchange rate breaking the psychological 100.00 level for the first time since Russia’s invasion of Ukraine, with a Kremlin economic advisor explaining that the main reason for the weak RUB was loose monetary policy. Notably, the CBR removed the following from the policy statement: “The Bank of Russia admits the possibility of a further increase in the key rate at the next meetings to stabilize inflation near 4% in 2024 and beyond”, potentially suggesting rate hikes were front loaded.
Since the decision, economic data has shown few surprises. Headline inflation rose from 4.30% y/y in July to 5.10% y/y in August, though was in-line with expectations. More broadly, however, strong consumption growth has been increasing the demand for imports, reducing the size of the current account surplus and weakening the RUB - USDRUB on the MICEX exchange remains relatively close to recent highs. This is therefore likely to incline the CBR to maintain its hawkish bias, having noted the following in its previous policy statement: “the pass-through of the ruble’s depreciation to prices is gaining momentum and inflation expectations are on the rise.”
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.