MNI CBRT Preview - November 2023: Moderation in Hiking Pace

Executive summary:

• Further tightening from the CBRT is expected this week, with the benchmark one-week repo rate expected to be raised by 250bps to 37.50%, marking a slowdown in pace from the 500bp moves in both September and October and 750bps in August.
• Given that inflation is still running above 60% Y/Y, additional tightening may still be required, though recent developments in inflation expectations have been favourable.
• Of the sell-side views we have previewed in this document, the vast majority are expecting a 250bp rate hike, although upside risks are noted by some.

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

MNICBRTPrevNov23.pdf

In October, the CBRT delivered another 500bp increase to the one-week repo rate, bringing cumulative tightening since the May elections to 2650bps in total. There were very few changes in the CBRT’s policy statement compared to the September edition. The central bank stated once again that monetary tightening will continue to be gradually strengthened until a significant improvement in the inflation outlook is achieved, citing rising oil prices as an upside risk to inflation.

Since the previous MPC meeting, CPI jumped a further 3.43% M/M in October, with the yearly figure crossing at 61.36% compared to 61.53% the month prior. Rising energy and food prices continue to be the main drivers, while core inflation rose from 68.93% Y/Y to 69.76%. However, according to the CBRT’s most recent survey of market participants, 12-month ahead inflation expectations eased to 43.9% in November from 45.3% in October, while 24-month ahead expectations eased to 25.1% from 25.8%. The readings marked the first declines in inflation expectations since April and March, respectively, offering the central bank room to scale down rate hikes from the 5ppt moves in September and October.