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MNI CBR Review: Hikes Potentially Frontloaded (1/2)

RUSSIA
  • The CBR delivered a 350bp rate hike at their unscheduled meeting yesterday, taking the key rate to 12%. The central bank raised rates 100bp in July and had not been scheduled to meet again until September 15 – which has been confirmed as the next meeting date.
  • The decision followed the USDRUB exchange rate breaking the psychological 100.00 level on Monday 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. The pair printed a fresh high above the 101.00 handle before paring gains on the announcement of the emergency CBR meeting in the afternoon. The RUB made further gains on the decision, and trades steady around 97.00 on the MICEX at typing.
  • Notably, the CBR removed the following from the 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 have been front loaded.
  • The central bank also said seasonally adjusted price growth was 7.6% on an annualised basis while core inflation increased to 7.1% - above the bank’s 4% target. The increase in domestic demand was explicitly attributed to dynamics in the RUB, though depreciation was noted to have positively impacted imports.
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